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(Business Address: No. Street City / Town / Province)
797-4889
ALBERTO M. DE LARRAZABAL
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Foreig
SEC Number
File Number
1177
____
GLOBE TELECOM, INC.
(Company‟s Full Name)
27th Floor The Globe Tower
32nd Street corner 7th Avenue, Bonifacio Global City, Taguig
(Company‟s Address)
(632) 797-2000
(Telephone Numbers)
31 March 2014
(Quarter Ending)
SEC FORM 17-Q
(Form Type)
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES
REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER
1. For the three months ended 31 March 2014
2. Commission identification number: 1177
3. BIR Tax Identification No. 000-768-480-000
4. Exact name of registrant as specified in its charter: GLOBE TELECOM, INC.
5. Province, country or other jurisdiction of incorporation or organization: PHILIPPINES
6. Industry Classification Code:
(SEC Use Only)
7. Address of registrant‟s principal office:
27th Floor, The Globe Tower
32nd Street corner 7th Avenue, Bonifacio Global City, Taguig
8. Registrant‟s telephone number, including area code: (632) 797-2000
9. Former name, former address and former fiscal year, if changed since last report: N / A
10. Securities registered pursuant to Sections in Securities Regulation Code
Title of each class
Common Stock, P50.00 par value
Preferred Stock, P5.00 par value
Number of shares of stock
outstanding
132,676,628
158,515,021
11. Are any or all of the Securities listed on the Philippine Stock Exchange? Yes
12. Indicate whether the registrant:
a) Has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17
thereunder or Sections 11 of the SRC and SRC Rule 11(a)-1 thereunder, and Sections
26 and 141 of the Corporation Code of the Philippines, during the preceding 12 months
(or for such shorter period the registrant was required to file such reports).
Yes
b) Has been subject to such filing requirements for the past 90 days.
Yes
SEC Form 17Q – 1Q 2014
2
GLOBE TELECOM, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
31 March 2014
SEC Form 17Q – 1Q 2014
3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited condensed consolidated financial statements include the accounts of Globe
Telecom, Inc. and its wholly owned subsidiaries, Innove Communications, Inc.(Innove), GXchange, Inc. (GXI), Entertainment Gateway Group (EGG Group), GTI Business Holdings, Inc.
(GTI BH), and Kickstart Ventures, Inc. (Kickstart), collectively referred to as the “Globe Group”
in this report.
The unaudited condensed consolidated financial statements for the three months ended 31 March
2014 (filed as Annex 1 of this report) have been prepared in accordance with Philippine
Accounting Standard 34, Interim Financial Reporting and hence do not include all of the
information required in the December 31, 2014 annual audited financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of Globe Group’s financial performance for the three
months ended 31 March 2014. The prime objective of this MD&A is to help the readers
understand the dynamics of the Company’s business and the key factors underlying its financial
results. Hence, Globe’s MD&A is comprised of a discussion of its core business, and analysis of
the results of operations for each business segment. This section also focuses on key statistics
from the unaudited consolidated financial statements and pertains to known risks and
uncertainties relating to the telecommunications industry in the Philippines where we operate up
to the stated reporting period. However, Globe’s MD&A should not be considered all inclusive,
as it excludes unknown risks, uncertainties and changes that may occur in the general economic,
political and environmental condition after the stated reporting period. The Globe Group has
adopted an expanded corporate governance approach in managing its business risks. An
Enterprise Risk Management Policy was developed to systematically view the risks and to manage
these risks in the context of the normal business processes such as strategic planning, business
planning, operational and support processes.
The Company’s MD&A should be read in conjunction with its unaudited consolidated financial
statements and the accompanying notes. All financial information is reported in Philippine Pesos
(Php) unless otherwise stated.
Any references in this MD&A to “we”, “us”, “our”, “Company” means the Globe Group and
references to “Globe” mean Globe Telecom, Inc., not including its wholly-owned subsidiaries.
Additional information about the Company, including annual and quarterly reports, can be found
on our corporate website www.globe.com.ph.
SEC Form 17Q – 1Q 2014
4
The following is a summary of the key sections of this MD&A:
OVERVIEW OF OUR BUSINESS ................................................................................... 6
FINANCIAL AND OPERATIONAL RESULTS ........................................................... 15
GROUP FINANCIAL SUMMARY ....................................................................................... 15
GROUP OPERATING REVENUES ..................................................................................... 17
GROUP OPERATING EXPENSES ...................................................................................... 32
LIQUIDITY AND CAPITAL RESOURCES ........................................................................ 37
FINANCIAL RISK MANAGEMENT ................................................................................... 42
LEGAL, REGULATORY AND CORPORATE DEVELOPMENTS ............................. 45
OTHER RELEVANT INFORMATION ......................................................................... 49
ANNEX TO THE MD&A SECTION.............................................................................. 51
SEC Form 17Q – 1Q 2014
5
OVERVIEW OF OUR BUSINESS
Globe Telecom, Inc. is a major provider of telecommunications services in the Philippines,
supported by over 6,300 employees and over 890,000 retailers, distributors, suppliers, and
business partners nationwide. The Company operates one of the largest and most technologicallyadvanced mobile, fixed line and broadband networks in the country, providing reliable, superior
communications services to individual customers, small and medium-sized businesses, and
corporate and enterprise clients. Globe currently has about 40.7 million mobile subscribers, close
to 2.2 million broadband customers, and over 611,000 landline subscribers.
Globe is one of the largest and most profitable companies in the country, and has been consistently
recognized both locally and internationally for its corporate governance practices. It is listed on
the Philippine Stock Exchange under the ticker symbol GLO and had a market capitalization of
US$4.9 billion as of the end of March 2014.
The Company‟s principal shareholders are Ayala Corporation and Singapore Telecom, both
industry leaders in their respective countries. Aside from providing financial support, this
partnership has created various synergies and has enabled the sharing of best practices in the areas
of purchasing, technical operations, and marketing, among others.
Globe is committed to being a responsible corporate citizen. Globe BridgeCom, the company‟s
umbrella corporate social responsibility program, leads and supports various initiatives that (1)
promote education and raise the level of computer literacy in the country, (2) support
entrepreneurship and micro-enterprise development particularly in the countryside, and (3) ensures
sustainable development through protection of the environment and excellence in operations.
Since its inception in 2003, Globe BridgeCom has made a positive impact on the lives of
thousands of public elementary and high school students, teachers, community leaders, and microentrepreneurs throughout the country. For its efforts, Globe BridgeCom has been recognized and
conferred several awards and citations by various Philippine and international organizations.
The Globe Group is composed of the following companies:

Globe Telecom, Inc. (Globe) provides mobile telecommunications services;

Innove Communications Inc. (Innove), a wholly-owned subsidiary, provides fixed line
telecommunications and broadband services, high-speed internet and private data
networks for enterprise clients, services for internal applications, internet protocolbased solutions and multimedia content delivery;

G-Xchange, Inc. (GXI), a wholly-owned subsidiary, provides mobile commerce
services under the GCash brand;

Entertainment Gateway Group Corp. (EGG), is engaged in the development and
creation of wireless products and services accessible through telephones and other
forms of communication devices. It also provides internet and mobile value-added
services, information technology and technical services including software
development and related services;
SEC Form 17Q – 1Q 2014
6

GTI Business Holdings, Inc. (GTI) is a wholly-owned subsidiary with authority to
provide VOIP services. Its wholly-owned subsidiaries are: GTI Corporation (GTIC
US), a company organized under the General Corporation Law of the State of
Delaware for the purpose of engaging in any lawful act or activity, Globe Telecom
HK Limited (GTHK), a limited company organized under the Companies Ordinance
of Hong Kong, Globetel European Limited and UK Globetel Limited, a private limited
company under the Companies Act of 2006, wherein the registered address is in
England and Wales; and

Kickstart Ventures, Inc. (Kickstart), a wholly-owned subsidiary, is a pioneering
business incubator designed to provide aspiring technopreneurs with funds and
facilities, mentorship and market access needed to build new businesses.

UK GlobeTel Limited (UKGT), a wholly-owned subsidiary, which market and sell
mobile telecommunications, as a mobile virtual network operator, to Filipino
individuals and businesses located within the United Kingdom and to Filipino visitors
in the United Kingdom.

GlobeTel European Limited (GTEU), a wholly-owned subsidiary, which acts as a
holding company for the operating companies of Globe Telecom, (which proposed to
establish operations in Europe, marketing and selling mobile telecommunications
services, as a mobile network operator, or through any other appropriate vehicle, to
Filipino individuals and businesses located within, and to Filipino visitors in, initially,
the United Kingdom, Spain and Italy.

Globe Mobile Italy s.r.l (GMI), a wholly-owned subsidiary, to perform, directly and/or
through its subsidiaries services such as voice calling, SMS, MMS, load top-up, and
mobile data to Filipinos based in Italy or Filipinos visiting Italy.
The Company is a grantee of various authorizations and licenses from the National
Telecommunications Commission (NTC) as follows: (1) license to offer and operate facsimile,
other traditional voice and data services and domestic line service using Very Small Aperture
Terminal (VSAT) technology; (2) license for inter-exchange services; and (3) Certificate of Public
Convenience and Necessity (CPCN) for: (a) international digital gateway facility (IGF) in Metro
Manila, (b) nationwide digital cellular mobile telephone system under the GSM standard (CMTSGSM), (c) nationwide local exchange carrier (LEC) services after being granted a provisional
authority in June 2005, and (d) international cable landing stations located in Nasugbu, Batangas
and Ballesteros, Cagayan.
Globe is organized along three key customer facing units (CFUs) tasked to focus on the integrated
mobile and fixed line needs of specific market segments. The Company has a Consumer CFU with
dedicated marketing and sales groups to address the needs of retail customers, and a Business CFU
(Globe Business) focused on the needs of big and small businesses. Globe Business provides endto-end mobile and fixed line solutions and is equipped with its own technical and customer
relationship teams to serve the requirements of its client base. In early 2011, Globe organized an
International Business Group to serve the voice and roaming needs of overseas Filipinos, whether
transient or permanent. It is tasked to grow the Company‟s international revenues by leveraging
on Globe‟s product portfolio and developing and capitalizing on regional and global opportunities.
SEC Form 17Q – 1Q 2014
7
Business Segments
Mobile Business
Globe provides digital mobile communication services nationwide using a fully digital network
based on the Global System for Mobile Communication (GSM) technology. It provides voice, data
and value-added services to its mobile subscribers through three major brands: Globe Postpaid,
Globe Prepaid and TM.
Globe Postpaid includes all postpaid plans such as regular G-Plans and consumable G-Flex Plans,
Load Allowance Plans, Load Tipid Plans and Platinum Plans (for the high-end market). In 2010,
the Company introduced the MY SUPERPLAN and MY FULLY LOADED PLAN which allow
subscribers to personalize their plans, choose and combine various unlimited call, text and web
browsing service options. In addition, Globe has made available various add-on roaming and
mobile browsing plans to cater to the needs of its subscribers. In 2011, Globe further improved
postpaid offerings with the All New My Super Plan where subscribers are given the flexibility to
create their own plans by either subscribing to an All-Unlimited Plan or an All-Consumable Plan.
Subscribers also get to choose their freebies and add-ons which they can change on a monthly
basis. A fully-customizable unlimited data plan (Unli Surf Combo Plan) was also made available
to its subscribers in mid-2011 which provides uninterrupted unlimited mobile surfing without the
need for a WIFI connection. The data plan comes with consumable amounts which the subscriber
may use to either local and international calls and text messages. Taking the product
customization to the next level, the company launched in the second quarter of 2013 the BESTEVER MY SUPERPLAN with fully-customizable plan components, bigger plan value and more
contract periods to choose from (6, 12, 18, and 30 months). Each plan has a corresponding “peso
value” that can be converted to avail of a combination of call, text, or surf services, free or
discounted gadgets, and a monthly consumable amount for more calls, texts and surf. In
November 2013, Globe Postpaid launched the iPhone Forever program bannering the latest phone
from Apple (iPhone 5s and iPhone 5c). Under the iPhone Forever program, new and existing
Globe subscribers who are loyal iPhone users may swap their current devices to get a new iPhone
every year for free or with minimal one-time cash out.
Globe Prepaid and TM are the prepaid brands of Globe. Globe Prepaid is focused on the
mainstream market while TM caters to the value-conscious segment of the market. Each brand is
positioned at different market segments to address the needs of the subscribers by offering
affordable innovative products and services. In February 2012, the Company introduced a selfservice menu that provides Globe prepaid subscribers an easy access to avail of the latest promos
and services of Globe by simply dialing *143#. In early 2013, this menu was further developed
with Globe Prepaid’s GO SAKTO which allows the subscribers to build their own promos (call,
text and surf promos) that is best suited for their needs and lifestyle.
Globe also provides its subscribers with mobile payment and remittance services under the GCash
brand. GCash transforms a mobile phone into a virtual wallet, enabling secure, fast, and
convenient way to transfer money at a cost of a text message. This service enables our subscribers
to perform international and domestic remittance transactions, pay fees, utility bills, income taxes,
avail of micro-finance transactions, donate to charitable institutions, and buy Globe prepaid
reloads. A wide network of local and international partnerships has been established over the
years including government agencies, utility companies, cooperatives, insurance companies,
remittance companies and commercial establishments, in order to make GCash an accepted mode
of payment for various products and services.
SEC Form 17Q – 1Q 2014
8
Globe Prepaid and TM subscribers can reload airtime value or credits using various reloading
channels including prepaid call and text cards, bank channels such as ATMs, credit cards, and
through internet banking. Subscribers can also top-up via AutoLoad Max retailers nationwide, all
at affordable denominations and increments. A consumer-to-consumer top-up facility, Share-ALoad, is also available to enable subscribers to share prepaid load credits via SMS.
Globe has a loyalty and rewards program called My Rewards, My Globe for Globe Prepaid
subscribers, TM Astig Rewards for TM subscribers and Tattoo+ Rewards for Tattoo Broadband
subscribers. Globe Postpaid subscribers can earn points based on their monthly billed amounts in
excess of their Monthly Subscription Fee. Subscribers have the option to redeem rewards
instantly, or accumulate points to avail of higher value rewards. Redeemed points in the form of
telecom services is netted out against revenues whereas points redeemed in the form of non-telco
services such as gift certificates and other products are reflected as marketing expense. At the end
of each period, Globe estimates and records the amount of probable future liability for unredeemed
points.
In 2014, Globe Postpaid recently launched the Globe Blue or Platinum Rewards Cards. The new
cards can also work as a GCash Mastercard which can be used to shop anywhere within the
Philippines and even abroad. Membership to Globe Blue is given to postpaid customers who
spend an average of P2,000- P3,499 per month over a 12-month period. Meanwhile membership
to the Globe Platinum is given to postpaid customers who subscribe to plan P3,799 or spend an
average of P3,500-P4,999 over a 12-month period; and membership to Platinum Elite Rewards
card is given to postpaid customer who subscribe to All Net P5,000 or P10,000; roaming P5,000 or
P10,000 or spend an average of P5,000 and above over a 12-month period. Special perks may vary
depending on the plan subscription.
Mobile Voice
Globe‟s voice services include local, national and international long distance call services. It
has one of the most extensive local calling options designed for multiple calling profiles. In
addition to its standard, pay-per-use rates, subscribers can choose from bulk and unlimited
voice offerings for all-day or off-peak use, and in several denominations to suit different
budgets.
Globe keeps Filipinos connected wherever they may be in the world, made possible by its tieup with over 700 roaming partners in more than 200 calling destinations worldwide. Globe
also offers roaming coverage on-board selected shipping lines and airlines, via satellite.
Through its Globe Kababayan program, Globe provides an extensive range of international
call and text services to allow OFWs (Overseas Filipino Workers) to stay connected with their
friends and families in the Philippines. This includes prepaid and reloadable call cards and
electronic PINs available in popular OFW destinations worldwide.
Mobile SMS, Mobile Browsing and Value-Added Services
Globe‟s Mobile SMS service includes local and international SMS offerings. Globe also offers
various bucket and unlimited SMS packages to cater to the different needs and lifestyles of its
postpaid and prepaid subscribers.
SEC Form 17Q – 1Q 2014
9
Globe‟s Mobile Browsing services allow subscribers to access the internet using their internetcapable handsets, devices or laptops with USB modems. Data access can be made using
various technologies including LTE, HSPA+, 3G with HSDPA, EDGE and GPRS. Browsing
subscribers also have multiple charging options available with Globe‟s Flexible Mobile
Internet Browsing rates which allow subscribers to choose between time or usage-based rates.
They can also choose between hourly, daily or monthly browsing plans.
Globe‟s Value-Added Services offers a full range of downloadable content covering multiple
topics including news, information, and entertainment through its web portal. Subscribers can
purchase or download music, movie pictures and wallpapers, games, mobile advertising,
applications or watch clips of popular TV shows and documentaries as well as participate in
interactive TV, do mobile chat, and play games, among others. Additionally, Globe
subscribers can send and receive Multimedia Messaging Service (MMS) pictures and video, or
do local and international 3G video calling.
Through Globe‟s partnership with major banks and remittance companies, and using Globe‟s
pioneering GCash platform, subscribers can perform mobile banking and mobile commerce
transactions. Globe subscribers can complete international and domestic remittance
transactions, pay fees, utility bills and income taxes, avail of micro-finance transactions,
donate to charitable institutions, and buy Globe prepaid load credits using its GCash-activated
SIM.
Fixed Line and Broadband Business
Globe offers a full range of fixed line communications services, wired and wireless broadband
access, and end-to-end connectivity solutions customized for consumers, SMEs (Small & Medium
Enterprises), large corporations and businesses.
Fixed Line Voice
Globe‟s fixed line voice services include local, national and international long distance calling
services in postpaid and prepaid packages through its Globelines brand. Subscribers get to
enjoy toll-free rates for national long distance calls with other Globelines subscribers
nationwide. Additionally, postpaid fixed line voice consumers enjoy free unlimited dial-up
internet from their Globelines subscriptions. Low-MSF (monthly service fee) fixed line voice
services bundled with internet plans are available nationwide and can be customized with
value-added services including multi-calling, call waiting and forwarding, special numbers and
voice mail. For corporate and enterprise customers, Globe offers voice solutions that include
regular and premium conferencing, enhanced voice mail, IP-PBX solutions and domestic or
international toll free services.
Fixed Line Data
Fixed line data services include end-to-end data solutions customized according to the needs
of businesses. Globe‟s product offerings include international and domestic leased line
services, wholesale and corporate internet access, data center services and other connectivity
solutions tailored to the needs of specific industries.
Globe‟s international data services provide corporate and enterprise customers with the most
diverse international connectivity solutions. Globe‟s extensive data network allow customers
SEC Form 17Q – 1Q 2014
10
to manage their own virtual private networks, subscribe to wholesale internet access via
managed international private leased lines, run various applications, and access other networks
with integrated voice services over high-speed, redundant and reliable connections. In
addition to bandwidth access from multiple international submarine cable operators, Globe
also has two international cable landing stations situated in different locales to ensure
redundancy and network resiliency.
The Company‟s domestic data services include data center solutions such as business
continuity and data recovery services, 24x7 monitoring and management, dedicated server
hosting, maintenance for application-hosting, managed space and carrier-class facilities for colocation requirements and dedicated hardware from leading partner vendors for off-site
deployment.
Other fixed line data services include premium-grade access solutions combining voice,
broadband and video offerings designed to address specific connectivity requirements. These
include Broadband Internet Zones (BIZ) for broadband-to-room internet access for hotels, and
Internet Exchange (GiX) services for bandwidth-on-demand access packages based on average
usage.
Globe Business also launched in 2013 new cloud capabilities featuring the first large-scale,
private and public-ready, next generation cloud in Asia - the PayrollCloud application, an
innovative Software-as-a-Service or SaaS providing on-time and accurate payroll accounting
system – from automatic calculation of salaries, standard time and attendance reports,
biometric integration, online application and customizable approval hierarchy and online
payslip access. Another is its Backup-as-a-Service platform which is the most advanced
backup and restoration software, that enables continuous data protection, local off-site storage
and managed services to industries, enterprises as well as small and medium businesses.
Broadband
Globe offers wired, fixed wireless, and fully mobile internet-on-the-go services across various
technologies and connectivity speeds for its residential and business customers. Tattoo@Home
consists of wired or DSL broadband packages bundled with voice, or broadband data-only
services which are available at download speeds ranging from 1 mbps up to 15 mbps. In
selected areas where DSL is not yet available, Globe offers Tattoo WiMAX, a fixed wireless
broadband service using its WiMAX network. Meanwhile, for consumers who require a fully
mobile, internet-on-the-go broadband connection, Tattoo On-the-Go allows subscribers to
access the internet using HSPA+, 3G with HSDPA, EDGE, GPRS or Wi-Fi at various hotspots
nationwide using a plug-and-play USB modem. This service is available in both postpaid and
prepaid packages. In addition, consumers in selected urban areas who require faster
connections have the option to subscribe to Tattoo Torque broadband plans using leading edge
GPON (Gigabit Passive Optical Network) technology with speeds of up to 100 mbps.
In September 2012, the Company officially launched its Long-Term Evolution (LTE)
broadband service with the Tattoo Black Postpaid Plans. The nomadic broadband plans are
equipped with an LTE dongle and LTE superstick that deliver browsing speeds of up to 42
Mbps and come with personalized customer handling services such as a dedicated hotline, a
relationship manager, and many other perks.
SEC Form 17Q – 1Q 2014
11
In 2013, Tattoo introduced its 4G product suite with the launch of Tattoo 4G Flash for only
P995 with surfing speeds of up to 7.2 Mbps. Tattoo At-Home on the other hand, offered free
unlimited calls to Globe/TM in every Tattoo@Home Broadband Bundle (landline + internet
service). Meanwhile, Tattoo Postpaid strengthens its lifestyle positioning with the unveiling
of Tattoo-Enjoy Card which allows new Tattoo Postpaid subscribers access to perks and
discounts to over 240 brand partners nationwide. Likewise, Tattoo Prepaid Lifestyle sticks
with surfing speed of up to 12 Mbps was made available to consumers for only P1,295. With
the increasing demand for mobile Wi-Fi and faster internet connectivity, Tattoo Prepaid relaunched its 4G SuperStick during the third period of 2013 with a more affordable price of
P1,995. Tattoo Postpaid also launched its new and improved postpaid personalized and
consumable plans with increased surfing speed now up to 42 Mbps. LTE plans starting at
P1,299 was made available with FREE LTE dongle or pay a one-time fee of P2,000 for an
upgrade to a mobile Wi-Fi device. Tattoo consumable plans was further improved with more
browsing hours (from 30 hours to 50 hours) for Plan 299 and for Plan 499 (from 50 hours to
85 hours) also with an option to upgrade to a mobile Wi-Fi device for only P150 per month.
Another Tattoo revolutionary promo offer during 2013 was the most affordable tablet bundles,
wherein its subscribers can get FREE three devices (Skyworth S73 tablet or a Cloudpad 705W,
a Blackberry Curve 9220 and the fastest broadband Wi-Fi stick) with unlimited internet
browsing and mobile text and call starting at Plan 1,298.
SEC Form 17Q – 1Q 2014
12
KEY PERFORMANCE INDICATORS
Globe is committed to efficiently managing the Company‟s resources and enhancing shareholder
value. The Company regularly reviews its performance against its operating and financial plans
and strategies, and use key performance indicators to monitor its progress.
Some of its key performance indicators are set out below. Except for Net Income, these key
performance indicators are not measurements in accordance with Philippine Financial Reporting
Standards (PFRS) and should not be considered as an alternative to net income or any other
measure of performance which are in accordance with PFRS.
AVERAGE REVENUE PER UNIT (ARPU)
ARPU measures the average monthly gross revenue generated for each subscriber. This is
computed by dividing recurring gross service revenues (gross of interconnect charges) for a
business segment for the period by the average number of the segment‟s subscribers and then
dividing the quotient by the number of months in the period.
SUBSCRIBER ACQUISITION COST (SAC)
SAC is computed by totaling marketing costs (including commissions and handset/SIM subsidies1)
related to the acquisition programs for the segment for the period divided by the gross incremental
subscribers.
AVERAGE MONTHLY CHURN RATE
The average monthly churn rate is computed by dividing total disconnections (net of
reconnections) for the segment by the average number of the segment‟s subscribers, and then
divided by the number of months in the period. This is a measure of the average number of
customers who leave/switch/change to another type of service or to another service provider and is
usually stated as a percentage.
EBITDA
EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) is calculated as service
revenues less subsidy1, operating expenses and other income and expenses2. This measure provides
useful information regarding a company‟s ability to generate cash flows, incur and service debt,
finance capital expenditures and working capital changes. As the Company‟s method of
calculating EBITDA may differ from other companies, it may not be comparable to similarly titled
measures presented by other companies.
1
2
Computed as non-service revenues less cost of sales, mostly on sale of handsets/SIM packs, accessories & gadgets
Operating expenses do not include any property and equipment-related gains and losses and financing costs
SEC Form 17Q – 1Q 2014
13
EBITDA MARGIN
EBITDA margin is calculated as EBITDA divided by total service revenues. Total service revenue
is equal to total gross operating revenue less non-service revenue. This is useful in measuring the
extent to which subsidies and operating expenses (excluding property and equipment-related gains
and losses and financing costs), use up revenue.
EBIT and EBIT MARGIN
EBIT is defined as earnings before interest, property and equipment-related gains and losses and
income taxes. This measure is calculated by deducting depreciation and amortization from
EBITDA. Globe Group‟s method of calculating EBIT may differ from other companies, hence,
may not be comparable to similar measures presented by other companies. EBIT margin is
calculated as EBIT divided by total service revenues.
CORE NET INCOME
Core net income is defined as net income after tax (NIAT) but excluding foreign exchange and
mark-to-market gains (losses), and non-recurring items such as the Company‟s accelerated
depreciation charges resulting from the network modernization and IT transformation program
implemented in 2012. Starting with the 2012 payout, dividends will be computed against prior
year‟s core net income instead of reported net income to ensure that dividends remain sustainable
and yields competitive, despite the expected decline in near-term profits arising from accelerated
depreciation charges related to the transformation efforts.
NET INCOME
As presented in the unaudited condensed consolidated financial statements for applicable periods,
net income provides an indication of how well the Company performed after all costs of the
business have been factored in.
SEC Form 17Q – 1Q 2014
14
FINANCIAL AND OPERATIONAL RESULTS
GROUP FINANCIAL SUMMARY
Globe Group
Quarter on Quarter
Results of Operations (Php Mn)
1Q
2014
Net Operating Revenues ……………….
Service Revenues ...……………………
Non-Service Revenues…………….......
Costs and Expenses …………………….
Cost of Sales……………………….......
Operating Expenses ……………….......
EBITDA………………………………….
EBITDA Margin………………………...
Depreciation…………………………......
Affected by network modernization…...
Others….................................................
EBIT……………………………………...
EBIT Margin…………………………….
Non-Operating Charges………………..
Net Income After Tax (NIAT)………….
Core Net Income.………………………..
24,360
23,230
1,130
15,564
2,867
12,697
8,796
38%
4,068
512
3,556
4,728
20%
(422)
2,949
3,357
4Q
2013
24,816
23,243
1,573
16,595
2,946
13,649
8,221
35%
5,607
733
4,874
2,614
11%
(616)
1,431
2,091
Year on Year
QoQ
Change
(%)
-2%
-28%
-6%
-3%
-7%
7%
-27%
-30%
-27%
81%
-31%
106%
61%
31 Mar
2014
24,360
23,230
1,130
15,564
2,867
12,697
8,796
38%
4,068
512
3,556
4,728
20%
(422)
2,949
3,357
31 Mar
2013
YoY
Change
22,470
21,368
1,102
13,694
2,707
10,987
8,776
41%
7,407
3,062
4,345
1,369
6%
(503)
656
3,086

Globe Group's consolidated service revenues for the first quarter improved by 9% to P23.2
billion from P21.4 billion last year.
Revenue growth remained broad-based with the
continued strong performance from all business segments. Mobile revenues grew by 8% from
the same period last year due to sustained growth of Globe Postpaid and TM, which improved
by 18% and 9%, respectively, and was supported by the strong overall subscriber growth.
Total mobile subscribers reached 40.7 million as of end-March 2014, up 16% year-on-year.
Globe‟s broadband and fixed line data segments remained robust, with year-on-year increases
of 12% and 19% respectively, due to expanded customer bases and the sustained demand for
data connectivity, while fixed line voice improved by 3% from same period last year.

On a sequential basis, consolidated service revenues declined by P13 million against the
record-high revenues reported in the fourth quarter of last year, despite the growth in
broadband, fixed line voice and fixed line data revenues partially mitigating the 1% decline in
the mobile segment.

Operating expenses and subsidy increased 15% year-on-year from P12.6 billion to P14.4
billion, as Globe re-invested its revenue gains in its subscribers, through subsidy and recontracting expenses, and its expanded network, through increases in network costs. Subsidy
and re-contracting costs were higher by 8% and 23%, respectively, with more new and
existing subscribers signing up for mid- to high-end plans vis-à-vis last year. To further
support the growing subscriber base, Globe likewise incurred higher trade provisions,
advertising and promotions, staff-related expenses and services charges in the first quarter of
2014. Mitigating these increases in costs, depreciation charges declined year-on-year, on
account of lower accelerated depreciation charges in the first quarter of 2014 as the bulk of
SEC Form 17Q – 1Q 2014
15
(%)
8%
9%
3%
14%
6%
16%
-45%
-83%
-18%
245%
-16%
350%
9%
such accelerated depreciation charges were incurred in 2013. Interconnect costs were also
lower against last year. In aggregate, total cost and expenses, including depreciation, for the
first quarter of 2014 declined by 7% year-on-year from P20.0 billion to P18.5 billion. On a
sequential basis, cost and expenses including depreciation, decreased by 10% quarter-onquarter, from P20.6 billion in the fourth quarter of 2014.

Consolidated EBITDA for the first three months of the year stood at P8.8 billion, up by P20.0
million against the same period last year, as the top line growth coupled by lower
interconnection fees slightly outpaced the increases operating expenses and subsidy. EBITDA
margin declined from 41% in the first period of 2013 to 38% in the first quarter of the year.
On a quarterly basis, consolidated EBITDA improved by P575 million or 7%, driven by costs
improvements quarter-on-quarter and resulting in EBITDA margin improvement from 35% in
the fourth quarter of the year.

Total depreciation expenses dropped year-on-year and quarter-on-quarter by 45% and 27%,
respectively as bulk of the accelerated depreciation charges related to network and IT
transformation projects was already incurred in 2013.

Non-operating charges declined year-on-year and quarter-on-quarter by 16% and 31%,
respectively, driven by lower net foreign exchange and mark-to-market losses coupled with
lower interest expenses recognized during the period.

The Company ended the three-month period with consolidated net income after tax of P2.9
billion, 350% higher against the P656 million reported net income in the first quarter of 2013.
This was driven by slightly higher EBITDA, lower depreciation charges, and less foreign
exchange and mark-to-market losses and softer interest expenses recognized during the period.
Excluding the non-recurring accelerated depreciation expenses and foreign exchange and
mark-to-market gains and losses, core net income after tax reached P3.4 billion as of end
March of 2014, representing a 9% increase from than the same period last year. On a
sequential basis, net income after tax likewise improved by 106% from P1.4 billion last
quarter due mainly to lower depreciation charges. Core net income after tax, likewise
increased by 61% from last quarter's P2.1 billion.

As of March 2014, total cash capital expenditures stood at about P4.7 billion, 32% lower than
last year's level of P6.9 billion. Globe continues to embark on its network and IT
modernization programs, building more sites to adapt to the changing landscape in the
country‟s key business districts, boosting capacity and enhancing the overall network
performance. To date, over 90% of the network is already on 4G HSPA+ providing faster
mobile browsing experience for Globe‟s subscribers. To support the requirements of its
subscribers for 2G, 3G and 4G services, Globe has a total of 22,813 base stations, including
over 8,400 4G base stations.
SEC Form 17Q – 1Q 2014
16
GROUP OPERATING REVENUES
Globe Group
Quarter on Quarter
Operating Revenues By Businesses
(Php Mn)
1Q
2014
4Q
2013
Year on Year
QoQ
Change
(%)
31 Mar
2014
31 Mar
YoY
Change
2013
(%)
Mobile
Service Revenues .…………….
Non-Service Revenues………...
19,333
18,456
877
19,785
18,691
1,094
-2%
-1%
-20%
19,333
18,456
877
18,053
17,124
929
7%
8%
-6%
Fixed Line and Broadband
Service Revenues ……………..
Non-Service Revenues………...
5,027
4,774
253
5,031
4,552
479
5%
-47%
5,027
4,774
253
4,417
4,244
173
14%
12%
46%
Total Operating Revenues………
24,360
24,816
-2%
24,360
22,470
8%
The Globe Group closed the first quarter with total operating revenues of P24.4 billion, up 8%
from last year. Compared to last quarter‟s result, operating revenues were slightly down by 2%
from P24.8 billion.
Mobile revenues, which accounted for 79% of consolidated service revenues as of end-March,
increased to P18.5 billion, up by 8% from last year‟s level of P17.1 billion due higher revenue
contributions from mobile data and domestic voice. This was likewise complemented by the
continued subscriber growth across all brands.
Broadband and fixed line businesses which comprise 21% of consolidated service revenues
likewise sustained its growth momentum across all segment with both broadband and fixed line
data growing in double digits at 12% and 19%, respectively. Traditional fixed voice revenues
likewise rebounded this period bringing year-on-year growth to 3%. Year-on-year increase in
broadband to P2.8 billion from P2.5 billion last year and the 5% quarter-on-quarter growth was
fueled by aggressive and competitive wireless and wired broadband offers. Globe ended the first
three months with 2.2 million broadband subscribers, up by 26% from same period last year.
Compared to the previous quarter, total broadband, fixed line data and fixed line voice improved
by 5%, 6% and 3%, respectively.
Mobile non-service revenues declined year-on-year and quarter-on-quarter by 6% and 20%,
respectively. Fixed line and broadband non-service revenues, on the other hand, increased
compared to the previous year by 46% mainly on sales on the back of strong broadband
acquisitions, but compared to previous quarter, it declined by 47%.
SEC Form 17Q – 1Q 2014
17
MOBILE BUSINESS
Quarter on Quarter
Mobile Service Revenues (Php Mn)
1Q
4Q
2014
2013
Year on Year
QoQ
Change
(%)
31 Mar
31 Mar
2014
2013
YoY
Change
(%)
Service Revenues *
Voice1..………………………….........
SMS2 …………………………...........
8,658
7,008
8,377
7,387
3%
-5%
8,658
7,008
7,670
6,961
13%
1%
Mobile Browsing and Other Data3.......
2,790
2,927
-5%
2,790
2,493
12%
Mobile Service Revenues………..........
18,456
18,691
-1%
18,456
17,124
8%
* 2011 service revenues have been restated to reflect the change in the presentation of outbound revenues to be at gross of interconnect
expenses (from net previously).
1
Mobile voice service revenues include the following:
a)
b)
c)
d)
e)
Prorated monthly service fees on consumable minutes of postpaid plans;
Subscription fees on unlimited and bucket voice promotions including the expiration of the unused value of denomination
loaded;
Charges for intra-network and outbound calls in excess of the consumable minutes for various Globe Postpaid plans, including
currency exchange rate adjustments, or CERA, net of loyalty discounts credited to subscriber billings; and
Airtime fees for intra network and outbound calls recognized upon the earlier of actual usage of the airtime value or expiration
of the unused value of the prepaid reload denomination (for Globe Prepaid and TM) which occurs between 3 and 120 days after
activation depending on the prepaid value reloaded by the subscriber net of (i) bonus credits and (ii) prepaid reload discounts;
and revenues generated from inbound international and national long distance calls and international roaming calls; and
Mobile service revenues of GTI.
Revenues from (a) to (e) are reduced by any payouts to content providers.
2
Mobile SMS revenues consist of local and international revenues from value-added services such as inbound and outbound SMS and
MMS, infotext, and subscription fees on unlimited and bucket prepaid SMS services, net of any interconnection or settlement payouts
to international and local carriers and content providers.
3
Mobile browsing and other data service revenues consist of local and international revenues from value-added services such as mobile
internet browsing and content downloading, mobile commerce services, other add-on VAS, and service revenues of GXI and EGG, net
of any interconnection or settlement payouts to international and local carriers and content providers.
Mobile Voice
Mobile voice revenues, which accounted for 47% of total mobile service revenues, grew by 13%
compared to the same period last year due to the increase in unlimited and bulk domestic voice
subscriptions. Against the fourth quarter mobile voice registered a 3% growth.
Globe remains the only operator in the country that offers per-second voice charging with Globe‟s
Super Sakto Calls and TM‟s Sulit Segundo which allow subscribers to make a local call for only
P0.15 per second. The Company continues to provide attractive and affordable bulk voice offers
such as Tawag 236 for 20-minute consumable calls for only P20 for Globe Postpaid and Globe
Prepaid subscribers and TM’s TodoTawag 15/15 service for 15-minute on-net call for only P15.
TM subscribers may also subscribe to SuliTawag for only P5 for 3-minute Globe and TM network
calls and TM Dagdag Call worth P5 which is an add-on service to subscribers registered to TM‟s
text promotions that provides 3-minute on-net calls. Likewise, GoCall100 was made available via
GoSakto which provide Globe Prepaid subscribers 500 minutes of on-net calls to Globe/TM for
only P100 for 7 days.
SEC Form 17Q – 1Q 2014
18
In addition, for Filipinos who wish to stay connected with their loved ones abroad, Globe
continues to offer its pioneering per-second charging for international voice calls, IDD Sakto Calls
for both Globe Postpaid and Globe Prepaid subscribers. Globe Prepaid’s GoTipIDD service
remains to be the lowest per-minute IDD rates in the market. In addition, Globe also provides a
bucket IDD service to popular and selected overseas destinations with its IDD Tingi promotion,
while offering its TipIDD card at various Globe distribution channels. The Company‟s
international voice services also include Super IDD, an unlimited call service for 24 hours to select
destinations worldwide, and Globe Duo International, which provides registered Globe Postpaid
and Globe Prepaid subscribers with virtual US landline numbers which they can use to
communicate with their loved ones in the USA. Families and friends in the USA in turn may call
their loved ones back in the Philippines and be charged at domestic US rates. This service was
further expanded to cover Korea, Canada and UK with the launch of Globe DUO Korea, Globe
DUO Canada and Globe DUO UK where it assigns a Korean, Canadian or UK number to a
Globe/TM mobile number in the Philippines which subscribers may use to call friends and loved
ones in Korea, Canada and UK directly while enjoying local (Korea/Canada/UK) domestic calling
rates. In the same manner, incoming calls from Korea, Canada and UK to Duo numbers registered
in the Philippines are also charged at local Korean, Canadian and UK rates. Globe Duo Korea,
Globe Duo Canada and Globe Duo UK are available to Globe Postpaid, Globe Prepaid, and TM
subscribers. In addition during the last quarter of 2013, TM launched TipIDD30 which offer four
(4) minutes of international calls to Saudi, UAE, Kuwait, Bahrain, Italy, UK, Australia and Japan
for only P30 a day.
The Company also provides its subscribers with the best possible mix of voice, SMS, and mobile
browsing services through its combo packages. For Globe Prepaid, subscribers have the choice
to avail of All-Unli Trio60, SuperUnliAllTxt 25, SuperAll Txt 20, Super Combo 20 and All Net
Combo. Another option that Globe Prepaid subscribers may choose to avail of is GoUnli, which
provides unlimited SMS to all networks as well as unlimited on-net calls, and unlimited use of
Facebook. The Company likewise offers Immortal Trio to Globe Prepaid subscribers to allow 50
on-net SMS, 5 all-network texts and 5 minutes of on-net calls for only P25 per subscription.
Globe Prepaid subscribers also have the option to subscribe to UnliTingi to get unlimited allnetwork texts, unlimited on-net calls, and unlimited mobile browsing valid for 1 hour for only P5.
SuperUnli, which allows unlimited calls and SMS within the Globe and TM networks, is also
available for one day subscription for Globe Prepaid subscribers for only P25. Another industryshaking innovation from Globe Prepaid is the launch of GoSakto in 2013 which empowers the
subscribers and gives them the flexibility to tailor-fit their prepaid promo based on their calling,
texting and surfing needs for the day, week or month. On top of this, subscribers can even name
the offer they created and share it among their friends on Facebook to allow their friends to
register to the same promo. Additionally, Globe, in partnership with Viber, launched several
value-for-money service offerings in order to give its Globe Prepaid subscribers a richer mobile
experience. GoUnli25, which offers the all-time favorite unlimited on-net voice and texts was
made even better with FREE unlimited Viber Chat offered at the same price of P25. Likewise,
Globe Prepaid’s GoUnli30 which allows unlimited all-network SMS, unlimited on-net call and
unlimited Facebook valid for a day was further improved during the third quarter of 2013 to
include the best Chat Apps for the same price of P30. Globe Prepaid subscribers can call their
friends abroad using Viber, enjoy real-time IM conversations via FB Messenger, send cute,
animated stickers using Kakao, and even leave personalized walkie-talkie voice messages using
WeChat! Other chat apps like Whatsapp, Line and GMessage can also be used for free with NO
WIFI needed.
SEC Form 17Q – 1Q 2014
19
For TM on the other hand, subscribers can choose from a wide array of unlimited and bucket offers
which will best fit their budget and lifestyle. Among the Unlimited Promo, TM subscribers can
avail of UnliCombo for as low as P15 for 1 day if they want to get unlimited on-net calls from
11PM to 6AM the following day and unlimited on-net SMS for 24 hours. Alternatively, they can
subscribe to UnliCombo20 if they want to get unlimited on-net calls from 10 PM to 5 PM the
following day and unlimited on-net SMS for 24 hours. Subscribers may also opt to choose a 2-day
unlimited on-net SMS with Astigtxt15. Bucket text and call services are likewise available for as
low as P10 for an unlimited on-net SMS and bulk on-net voice calls with AstigCombo10.
Astigcombo15 is also available which gives unlimited on-net texts and 30 minutes on-net calls for
P15 a day. TM subscribers may avail of Combo15 to get unlimited on-net SMS, 50 all-network
text service, and 10 consumable minutes within the TM and Globe networks for 2 days as well as
Combo20 which offer unlimited on-net texts to Globe/TM plus 50 All-net texts and 20 minutes
calls to Globe/TM for only P20. On top of this, TM subscribers can now extend for another 24
hours their favorite TM promo for only P5.
Mobile SMS
Mobile SMS which accounted for 38% of total mobile service revenues, closed the first quarter at
P7 billion, slightly higher by 1% from same period last year. However, on a sequential basis,
mobile SMS revenues declined by 5% coming off from highs in the seasonal fourth quarter of last
year.
Globe showcases a comprehensive line up of mobile SMS services ranging from unlimited and
bucket text services to combo voice, SMS and surf promotions. Globe continues to provide its
prepaid subscribers with all-day unlimited on-net SMS with UnliTxt and AstigTxt, respectively.
Globe Postpaid and Globe Prepaid subscribers may get 30 days of unlimited on-net text service
by subscribing to SuperTxt. TM subscribers can likewise subscribe to other variants of the
AstigTxt offering for unlimited on-net SMS valid for 2 days, 3 days, or 5 days. For on-net bucket
SMS offers, Globe continues to provide SuliTxt which allows 100 and 25 text messages for a
single day subscription. The Company also offers all-network text services such as My SuperTxt
All, an unlimited text service for 30 days available for postpaid subscribers and UnliTxtAll20 for a
1-day unlimited SMS to all networks for TM subscribers. All network bucket text services are
likewise available with Globe Prepaid’s SuperAllTxt for 250 SMS and TM‟s AstigTxtAll for 150
SMS, both valid for a day. Meanwhile, in response to the market‟s clamor for prepaid offers with
longer validity periods, Globe Prepaid likewise introduced via GoSakto GoUnlitxt49 which offer
its subscribers unlimited on-net texts to Globe/TM for only P49. TM subscribers may avail of
Combo10 and Combo15 to get unlimited on-net SMS, 50 all-network text, and 10 consumable
minutes to TM and Globe subscribers. Likewise, AstigItxt20 was introduced in the market during
the last quarter of 2013 which gives TM subscribers 30 international and all-network texts for only
P20 valid for 1 day.
Mobile Browsing and Other Data
Mobile browsing & other data revenues which accounted for 15% of total mobile service revenues
increased to P2.8 billion as of end-March 2014, up 12% from P2.5 billion in March 2013, driven
by the continuous demand for data services and the popularity of data-driven products and
applications, the increased pervasiveness of Globe‟s 3G, HSPA+ and LTE networks and the
proliferation of data-enabled smartphones. On a sequential basis, mobile browsing & other data
revenues declined by 5%, given the full quarter impact of the Free Facebook promo launched last
November 2013. However, the Free Facebook campaign showed promising result as it helped
SEC Form 17Q – 1Q 2014
20
seed the habit of internet access on our wireless data networks, with registered mobile data
services doubling during the promo period.
Globe‟s mobile browsing services includes unlimited chatting, downloading, emailing, and surfing
offers to its Globe Postpaid and Globe Prepaid subscribers with its add-on data plan SuperSurf for
as low as P50 for 1 day. The Company also offers consumable mobile browsing for as low as P15
for 1 hour with Prepaid Power Surf for its Globe Prepaid and TM subscribers. Prepaid and
Postpaid subscribers can avail of different Power Surf variants: 50MB for only P99, 300 MB for
only P299 and 1GB for only P499. All Power Surf plans are automatically bundled with the Globe
No Bill Shock Guarantee, so subscribes who exceed their monthly MB allocations will never pay
more than P999. For unlimited access to Facebook, Super Facebook and TM Astig Facebook are
available for only P10 a day for its Globe Prepaid and TM subscribers. Meanwhile, Globe and TM
Prepaid subscribers who want a full Viber experience with unlimited high-definition voice calls
and unlimited chat can avail of Viber20 for P20 a day and those who want unlimited Viber chat
only can either avail of Viber10, a one day variant for only P10 or Viber30 for five days unlimited
Viber chat for P30. Prepaid subscribers who just want unlimited access to messaging applications
(Viber, Whatsapp, Line, FB Messenger, Kakao etc.) may opt to register to Unlichat25 for only
P25.
For BlackBerry® users, the Company continues to offer Super Surf for BlackBerry® Max for allin unlimited BlackBerry® services for as low as P50 a day. Globe also provides unlimited use of
push email applications such as Yahoo! Mail, GMAIL, MSN and any POP3 or IPOP email
account with its add-on data service BlackBerry® Messaging. The Company also provides
unlimited access to social networking applications with its BlackBerry® Social offering of P299
valid for 30 days. For unlimited use of BlackBerry® Messenger and free on-net SMS, Globe
Postpaid and Globe Prepaid subscribers may register to BlackBerry® Chat.
Setting another milestone in Philippine telecommunications, the Company gave its over 40.7
million subscribers (Postpaid/Prepaid/TM) free mobile phone access to Facebook beginning
October 31, 2013 and was extended until April 30, 2014. Globe worked closely with Facebook to
enable customer experience innovations for the best free Facebook offer (users can post, like,
comment, chat, add friends, upload photos, share posts, and more on Facebook) without the need
for Wi-Fi. This campaign is in line with Globe‟s strategy to bring more people online and
overcome the fear of using mobile internet, and increase the habit of mobile browsing and surfing
over Globe‟s improved 3G, HSPA+ and LTE networks.
SEC Form 17Q – 1Q 2014
21
The key drivers for the mobile business are as follows:
Quarter on Quarter
4Q
QoQ
Change
2014
2013
(%)
1Q
31 Mar
Year on Year
31 Mar
2014
2013
YoY
Change
(%)
Cumulative Subscribers (or SIMs) – Net
Globe Postpaid 1……………………………….
40,749,094
2.088,413
38,475,130
2,025,538
6%
3%
40,749,094
2.088,413
35,141,918
1,857,342
16%
12%
Prepaid.…………………………………….
Globe Prepaid……………………………..
TM.………………………………………….
38,660,681
18,699,346
19,961,335
36,449,592
17,836,441
18,613,151
6%
5%
7%
38,660,681
18,699,346
19,961,335
33,284,576
16,946,327
16,338,249
16%
10%
22%
Net Subscriber (or SIM) Additions
Globe Postpaid..…………………………...…..
2,273,964
62,875
1,958,419
45,980
16%
37%
2,273,964
62,875
2,022,883
122,874
12%
-49%
Prepaid.…………………………………….
Globe Prepaid……………………………..
TM.………………………………………….
2,211,089
862,905
1,348,184
1,912,439
872,502
1,039,937
16%
-1%
30%
2,211,089
862,905
1,348,184
1,900,009
506,185
1,393,824
16%
70%
-3%
ARPU 2
Globe Postpaid………………………………...
1,140
1,178
-3%
1,140
1,105
3%
Prepaid
Globe Prepaid………………………….....
TM…………………………………………..
128
77
140
81
-9%
-5%
128
77
141
86
-9%
-10%
Subscriber Acquisition Cost (SAC)
Globe Postpaid………………………………...
9,074
7,607
19%
9,074
7,972
14%
Prepaid
Globe Prepaid……………………………..
TM.………………………………………….
23
15
28
35
-18%
-57%
23
15
20
21
15%
-29%
Average Monthly Churn Rate (%)
Globe Postpaid....……………………………...
2.2%
2.2%
2.2%
1.6%
Prepaid
Globe Prepaid……………………………..
5.4%
5.7%
5.4%
5.1%
TM.……………………………………….....
6.5%
7.0%
6.5%
5.6%
Average Revenue Per Subscriber (ARPU)
1
As of 1Q 2014, Globe had a total of 2.50 million wireless postpaid subscribers which include 2.09 million mobile telephony and 0.41 million
wireless broadband customers. This is higher compared to the 2.42 million wireless postpaid subscribers as of 4Q 2013. Mobile telephony
revenues are reflected under “Mobile Service Revenues” while wireless broadband revenues are included under “Broadband.”
2
ARPU is computed by dividing recurring gross service revenues (gross of interconnect expenses) segment by the average number of the
segment’s subscribers and then dividing the quotient by the number of months in the period.
Globe ended the first quarter with a total mobile subscriber base of 40.7 million, up 16% from 35.1
million subscribers versus same period last year. First quarter‟s gross subscriber acquisitions once
again registered a record-high of 9.1 million subscribers, 3% higher than the strong fourth quarter
additions. This was mainly contributed by the record acquisitions of the Company‟s mass market
brand (TM) as well as increased Postpaid subscriptions. The Free Facebook campaign helped
drive subscriber uptake particularly on the prepaid side of the business. Despite the elevated
SEC Form 17Q – 1Q 2014
22
blended churn rate as of end-March of 2014 of 5.77% from 5.14% of same period last year, full
year net incremental subscribers leapt to 2,273,964, 12% higher than 2013 level of 2,022,883 net
additions.
The succeeding sections cover the key segments and brands of the mobile business – Globe
Postpaid, Globe Prepaid and TM.
Globe Postpaid
Globe remained to be the leader in the postpaid segment with the continued growth in acquisitions
as of first quarter of 2014 registering over 2.0 million subscribers from 1.9 million in the same
period last year. The continued success of the fully-customizable and best-in-class postpaid plans
together with the exclusive device offers and innovative deals helped boost gross additions to
reach 199,691 as end of first quarter. Year-to-date net incremental postpaid subscribers stood at
62,875, 49% lower than 2013 level of 122,874.
In order to sustain the growth momentum for mobile postpaid and maintain its leadership on this
segment of the market, the Company boosted its offerings during the first quarter of 2014.
Globe Postpaid ARPU of P1,140 was above than last year‟s P1,105 as a result of a higher mix of
mid to high-end MSF plans.
Globe Postpaid subscriber acquisition cost (SAC) significantly increased year-on-year and
quarter-on-quarter by 14% and 19%, respectively, driven by Globe‟s second-highest quarterly
gross activations coupled with the shift in mix to high and mid-end plans. However, Globe
Postpaid SAC remained recoverable within the 24-month contract period.
Prepaid
Globe‟s prepaid segment, which includes the Globe Prepaid and TM brands, accounts for 95% of
its total mobile subscriber base. As of the first quarter of 2014, cumulative prepaid subscribers
stood at about 38.7 million, 16% better than last year‟s level of 33.3 million.
A prepaid subscriber is recognized upon the activation and use of a new SIM card. The subscriber
is provided with 60 days (first expiry) to utilize the preloaded SMS value. If the subscriber does
not reload prepaid credits within the first expiry period, the subscriber retains the use of the mobile
number but is only entitled to receive incoming voice calls and text messages for another 120 days
(second expiry). The second expiry is 120 days from the date of the first expiry. However, if the
subscriber does not reload prepaid credits within the second expiry period, the account is
permanently disconnected and considered part of churn. The first expiry periods of reloads vary
depending on the denominations, ranging from 1 day for P10 to 60 days for P300 to P500 reloads.
The first expiry is reset based on the longest expiry period among current and previous reloads.
Under this policy, subscribers are included in the subscriber count until churned.
In 2009, the National Telecommunications Commission (NTC) published Memorandum Circular
03-07-2009 which promulgates the extension of the validity periods of prepaid reloads effective
July 19, 2009. Under the new pronouncement, the first expiry periods now range from 3 days for
P10 or below to 120 days for reloads amounting to P300 and above. The second expiry remains at
120 days from the date of the new first expiry periods.
SEC Form 17Q – 1Q 2014
23
The succeeding sections discuss the performance of the Globe Prepaid and TM brands in more
detail.
a. Globe Prepaid
Globe Prepaid gross acquisitions slightly improved in the first quarter versus the preceding
quarter‟s record highs, bringing gross additions to 3.8 million or 25% higher than same period last
year‟s level of 3.1 million. First quarter‟s net incremental subscribers also improved by 70% to
862,905 from 506,185 in 2013, despite the elevated churn rates of 5.45% this period from 5.12%
in same period last year.
During the first quarter of 2014, Globe Prepaid further intensified its customizable service
offerings with the launch of the new GoUnli25 via the “GO SAKTO” mobile app (which can now
be downloaded on the Apple App Store or Google Play) or by dialing *143#. The new GoUnli25
now offers unlimited texts and calls to Globe/TM, unlimited Facebook, plus a choice of one FREE
app (from the following: twitter, instagram, google, yahoo, viber, foursquare) still at P25/day.
Globe Prepaid ARPU declined by 9% year-on-year resulting from the revenue dilution from
unlimited and bucket service offerings. Globe Prepaid SAC increased by 15% versus same period
last year due to higher ads and promo, but declined by 18% compared to last quarter due to lower
marketing spend on ads during the period.
b. TM
TM on the other hand, generated the highest gross acquisitions during the quarter, 5,087,842 new
SIMs or 6% better than previous quarter level of 4,818,252. The extension of the free Facebook
promo boosted this quarter‟s acquisition coupled by TM‟s continued aggressive acquisition efforts.
Due to the increased churn rate as of end March 2014, net incremental subscribers declined by 3%
from about 1.4 million in 2013 to only 1.3 million this period.
During the period, TM introduced a new affordable and cheap promo offer with UNLICALL15
giving its subscribers with Unlimited call to all Globe and TM subscribers for as low as P15 valid
for 1 day and also the new UNLIALLNET10 which provides its subscribers with unlimited texts to
all networks for P10 a day.
TM ARPU was down by 10% year-on-year with the continued shift from regular pay-as-you-use
service to unlimited and value offers. TM SAC, however, declined from same period a year ago
and from last quarter by 29% and 57%, respectively due to increased ads and promo.
SEC Form 17Q – 1Q 2014
24
GCash
GCash continues to establish its presence in the mobile commerce industry. GCash‟s initial thrust
towards money-transfers, purchase of goods and services from retail outlets, and sending and
receiving domestic and international remittances has spurred alliances in the field of mobile
commerce.
Today, GCash allows Globe and TM subscribers to pay or transact for the following using their
mobile phone:











domestic and international remittances
utility bills
interest and amortization of loans
insurance premiums
donations to various institutions and organizations
sales commissions and payroll disbursements
school tuition fees
micro tax payments and business registration
electronic loads and pins
online purchases
airline tickets
In addition to the above transactions, GCash is also used as a wholesale payment facility. In 2011,
Globe increased the number of establishments that offer GCash as an alternative and efficient
payment mode. Quick Delivery tapped GCash to be its newest payment mode to make it easier,
safer and more convenient to order food from Metro Manila‟s top restaurants, specialty stores, and
even wine merchants. The largest local chain of movie theaters, SM Cinema, was able to launch
the first mobile ticketing service in the country through GCash, allowing moviegoers to purchase
tickets online, pay via GCash, and redeem movie tickets at the cinemas using their mobile phones.
In October 2010, Globe launched the GCash Card, the country‟s first customizable ATM card
linked to a mobile wallet. This gives subscribers 24/7 access to GCash and allows them to
withdraw funds via any of the 9,000 Bancnet, Megalink, ExpressNet or Encash Automated Teller
Machines (ATMs) nationwide. In addition, the GCash Card is the only customizable ATM Card
in the country where subscribers can make their own personalized ATM card design or choose
from a variety of design templates.
In 2011, GCash further strengthened its presence in the mobile money transfer business by
establishing partnerships with various institutions. Globe partnered with Ericsson to integrate
GCash into the new Ericsson Money Services making GCash one of the first partners for this
innovative end-to-end mobile money solution. The Company also inked a partnership with USbased IDT Corporation which will enable GXI to strengthen its GCash Remit‟s international
remittance service by facilitating connectivity between traditional money transfer operators and
GCash utilizing IDT‟s economical corridor routing, transaction settlement and foreign currency
exchange services. Globe, through GXI, also partnered with Japan‟s SOFTBANK Corp. through
its subsidiary SBPS for an affordable, convenient, and secure remittance service that will allow
Filipinos living and working in Japan to remit money to the Philippines via the GCash platform.
The Company likewise set up a partnership with Xpress Money, a leading global instant money
transfer brand, to further extend the latter‟s strong payout network in the Philippines. With this
SEC Form 17Q – 1Q 2014
25
tie-up, beneficiaries of Xpress Money Cash Pick Up remittances can now claim their money from
the network of GCash Remit outlets nationwide.
In 2012, Globe launched GCash PowerPay+ to provide an additional channel to facilitate mobile
transactions. GCash PowerPay+ is a funds disbursement service linked to a Globe or TM SIM
and comes with an optional insurance coverage. With GCash PowerPay+,users enjoy mobile
money services like sending money, buying Globe or TM airtime load with a 10% rebate, and
paying bills at the speed of a text message without the need to cash-in to one‟s GCash account. It
also allows 24/7 withdrawal from any of the 9,000 Automated Teller Machines (ATMs)
nationwide, cashless shopping through Megalink, BancNet and ExpressNet point of sale and
financial assistance for accidental death and burial assistance, life cover, residential fire, and ATM
theft.
Globe has also launched GCash Remit Service to provide mobile subscribers a quick, affordable
and convenient way to send and receive domestic and international remittances. With the approval
of the Bangko Sentral ng Pilipinas (BSP) to use its sub-distributors as cash-in and cash-out outlets,
GCash now has the largest remittance network in the country with more than 9,000 active GCash
outlets nationwide.
Meanwhile, for electronic banking services, GCash secured a partnership with Philippine Savings
Bank (PSBank), the thrift banking arm of the Metrobank Group, to enhance its electronic banking
channels. Through GCash, PSBank accountholders can do various financial transactions such as
payments, account inquiries and reloading from their PSBank account to their enrolled GCash
wallet and vice-versa. In the same manner, Globe partnered with UnionBank of the Philippines
(UnionBank) for its eMoneyXchange service that will allow customers to link their UnionBank
accounts to their GCash mobile wallets enabling UnionBank clients with EON, E-Wallet,
ePayCard and UnionBank regular savings and checking accounts to transfer funds to and from
their GCash wallets through their UnionBank account via SMS.
To further complement its mobile wallet functions, Globe partnered with American Express® to
launch the GCash American Express® Virtual Card. The prepaid virtual card is linked to a
subscriber‟s GCash mobile wallet and allows users to shop conveniently online from both local
and international sites. Further, it gives the user a personalized US Address to allow delivery of
purchases from international online sites which may not be directly shipping goods to the
Philippines.
To reach out to a wider audience and complement the increased smartphone penetration, Globe
launched a GCash mobile application for BlackBerry® devices in 2011. The mobile application
can be downloaded for free via the BlackBerry® App World. Beginning third quarter of 2012,
however, the Company has made the GCash mobile wallet available and accessible to a wider
subscriber base who may download the application for free from the App Store and Google Play.
The efficiency of GCash’s mobile cash transfer system was recognized by various government
agencies and socially-oriented organizations such as DSWD (Department of Social Welfare and
Development), Simbahang Lingkod ng Bayan (SLB), and the United Nations World Food
Programme (WFP). In 2011, GCash Remit was tapped by DSWD and Land Bank of the
Philippines for the distribution of the government‟s Conditional Cash Transfers (CCT). A total of
about P4.5 billion worth of CCT were distributed to beneficiary families in over 9,000 barangays
nationwide via its domestic cash pick-up service. The GCash platform was also utilized by SLB, a
church-based, Jesuit-led organization, as a donation channel for its relief operations for typhoon
SEC Form 17Q – 1Q 2014
26
victims. The WFP meanwhile named GCash as a benchmark for their operations worldwide.
WFP is the world‟s largest humanitarian agency fighting hunger worldwide. WFP is currently
involved in the disaster relief operations for typhoon Sendong victims in Mindanao. To improve its
efficiency in delivering assistance, WFP has tapped Globe through its GCash mobile technology
platform for the fast, secure and low-cost delivery of financial assistance to families who were
severely affected by calamities. The partnership flourished with Globe providing the necessary
platform to facilitate the Cash-for-Work program and other relief and recovery operations by the
WFP. Through GCash, WFP discovered a new and efficient way of providing financial assistance
to help families restore and rebuild their lives.
On June 19, 2013, Globe achieved another milestone with its partnership with Home Development
Mutual Fund (HDMF) or the PAG-IBIG Fund to allow their over 12.6 million members to transact
with Pag-ibig via GCash, making it easy and more convenient for them to facilitate their Pag-Ibig
transactions. Pag-Ibig members can now easily pay their monthly mandatory savings and housing
loans anytime, anywhere using their GCash wallets linked to their Globe or TM phones,
eliminating the need to go to a Pag-Ibig office or an accredited payment center.
Also, GCash can now be used to purchase load even for other mobile networks via *143#. In
addition, CitiExpress and Unilink, as new GCash express partners, started offering GCash express
cards to their customers.
Moreover, GCash, is set to expand its network service in the country by growing its user base with
the recent partnership with TORCHe Global Marketing, Inc. (TGMI), a marketing consultancy
firm focused on helping companies reach out to the widest possible consumer base through the
latest technologies in mobile commerce and advertising. GCash services that will be made
available for use of TGMI affiliates include PowerPay+ Card, Buy Load service and Gcash
outlets.
During the last quarter of 2013, several initiatives on GCash were launched in order to expand its
portfolio of services including real property tax payments via GCash available in Quezon City and
Valenzuela; buy through blink coupon codes for subscribers to experience unlimited Movie and
TV show streaming; or convert Gcash to rewards points. In addition, subscribers can now also
apply for BanKO loan via GCash with low interest rate, fast approval and hassle-free loan
payments. Loan credit and collection will be through their GCashPowerPay+ wallet.
In 2014, GCash may now be used at Puregold to pay for groceries, bills and for cash remittances.
Also, Globe Charge Mobile Card Reader was likewise introduced to the market last March 27,
2014 which turns the subscriber‟s smartphone into a credit card terminal.
BPI Globe BanKo
On October 9, 2009, the Company announced that the BSP has approved the sale and transfer by
Bank of the Philippine Islands (BPI) of its shares of stock in Pilipinas Savings Bank, Inc. (PSBI)
that will result in the ownership of PSBI as follows: 40% each for BPI and Globe Telecom and
20% for Ayala Corporation (AC). On October 23, 2009 the official name of PSBI was changed to
BPI Globe BanKo, Inc. after getting the approval of both the BSP and the Securities and Exchange
Commission (SEC). BPI Globe BanKo, Inc. is the country‟s first mobile microfinance bank.
BPI Globe BanKo, Inc. opened its first branch last February 2010, and added 5 provincial
branches located in Dipolog, Dumaguete, Lucena, Naga and Tacloban. While the bank‟s initial
SEC Form 17Q – 1Q 2014
27
focus is on wholesale lending to other microfinance institutions, it is now expanding into retail
banking products and services to include micro-savings, micro-lending, and insurance.
In 2011, BPI Globe BanKO, Inc. launched an innovative product that does not only generate
healthy financial returns, but also gives depositors an opportunity to help those in the low-income
segment by helping create a solid base for their savings and investments. Called the BanKO
Social Initiative (BSI) Deposit, the product is a passbook-based, regular savings account which
pays 4.5% interest per annum on a quarterly basis. The minimum deposit requirement is P100,000
with a hold-out period of at least 6 months. The BSI Deposit account, which does not charge
depositors with documentary stamp taxes, is also insured with the PDIC for amounts up to
P500,000 per depositor.
In 2013, BPI-Globe Banko, the first mobile-based, microfinance-focused savings bank in the
Philippines, have joined hands with US Agency for International Development, in helping rural
communities gain access to formal financial services (i.e. cash in and cash out transactions, bills
payment, airtime loading, money remittance, and micro-insurance purchase) using their mobile
phones. This partnership was announced during the launch of the mobile money financial service
for the llijan Multi-Purpose Cooperative.
In 2014, Globe BanKO launched BanKO Interoperability (Phase 1), which allows all BanKO
customers to make Cash-in and Cash-out transactions in almost all GCash outlets nationwide.
SEC Form 17Q – 1Q 2014
28
FIXED LINE AND BROADBAND BUSINESS
Quarter on Quarter
Service Revenues
(Php Mn)
Year on Year
1Q
4Q
QoQ
31 Mar
31 Mar
YoY
2014
2013
Change
2014
2013
Change
Service
Broadband 1………………………
Fixed line Data 2..………………...
Fixed line Voice 3 ….…………….
Fixed line & Broadband Service
Revenues……...……………………….
1
b)
c)
d)
5%
6%
2,790
1,319
2,486
1,111
12%
19%
665
647
3%
665
647
3%
4,774
4,552
5%
4,774
4,244
12%
Monthly service fees of wired, fixed wireless, and fully mobile broadband data only and bundled voice and data
subscriptions;
Browsing revenues from all postpaid and prepaid wired, fixed mobile and fully mobile broadband packages in excess of
allocated free browsing minutes and expiration of unused value of prepaid load credits;
Value-added services such as games; and
Installation charges and other one-time fees associated with the service.
Fixed line data service revenues consist of the following:
a)
b)
c)
d)
3
2,663
1,242
Broadband service revenues consist of the following:
a)
2
2,790
1,319
Monthly service fees from international and domestic leased lines;
Other wholesale transport services;
Revenues from value-added services; and
One-time connection charges associated with the establishment of service.
Fixed line voice service revenues consist of the following:
a)
b)
c)
d)
e)
f)
Monthly service fees;
Revenues from local, international and national long distance calls made by postpaid, prepaid fixed line voice subscribers
and payphone customers, as well as broadband customers who have subscribed to data packages bundled with a voice
service. Revenues are net of prepaid and payphone call card discounts;
Revenues from inbound local, international and national long distance calls from other carriers terminating on Globe‟s
network;
Revenues from additional landline features such as caller ID, call waiting, call forwarding, multi-calling, voice mail, duplex
and hotline numbers and other value-added features;
Installation charges and other one-time fees associated with the establishment of the service; and
Revenues from DUO and SUPERDUO (Fixed line portion) service consisting of monthly service fees for postpaid and
subscription fees for prepaid.
SEC Form 17Q – 1Q 2014
29
Broadband
Quarter on Quarter
Year on Year
1Q
4Q
QoQ
31 Mar
31 Mar
YoY
Change
2014
2013
Change
2014
2013
Cumulative Broadband Subscribers
Wireless 1…………………………...
Wired………………………………..
1,798,378
392,000
1,653,647
378,255
9%
4%
1,798,378
392,000
1,388,649
352,302
30%
11%
Total (end of period)…………………..
2,190,378
2,031,902
8%
2,190,378
1,740,951
26%
1
Includes fixed wireless and fully mobile broadband subscribers.
Globe Tattoo Broadband keeps positive momentum going with 12% growth in revenues for the
first three months from P4.2 billion to P4.8 billion as a result of the 26% growth in its subscriber
base. Strong growth in the broadband business resulted from aggressive acquisitions campaigns,
attractive pricing offers and product bundles. Quarter-on-quarter, revenues likewise grew by 5%
from P4.6 billion last quarter. Tattoo Broadband‟s sustained growth was mainly due to the improved
ARPUs across all product segments and higher subscriber base for both Tattoo-At-Home and
Tattoo-On-The-Go, rising to 2,190,378 subscribers from 2,031,902 last quarter.
The Company continued its commitment to offer broadband differentiated and value priced
products. The widest range of Tattoo Prepaid mobile Wi-Fi devices was made available during
the period including 4G mobile Wi-Fi with speed up to 12mbps, connects up to 10 devices for only
P1,995; 4G mobile Wi-Fi + Powerbank which full charge the phone up to 3x for only P3,795 and
LTE mobile Wi-Fi with speed up to 42mbps, connects up to 10 devices + Powerbank, which full
charge the phone, for only P4,995. Tattoo Postpaid likewise introduced the best value tablet
bundle with no upfront cash out – Samsung Galaxy Tab 3 + FREE mobile Wi-Fi for P899 per
month and Postpaid Tattoo Plan with free LTE stick (Plan999) or LTE Mobile WiFi (Plan1299).
Meanwhile, Tattoo Home Broadband banners its Plan1599 internet service + landline bundle,
now with speed up to 5mbps.
Fixed line Data
Service Revenues (Php Mn)
Fixed line Data
International …..………………………....
Domestic….… …………………..............
Others 1..…………………………………
Total Fixed line Data Service Revenues…..
1
Quarter on Quarter
1Q
4Q
QoQ
2014
2013
Change
258
629
432
1,319
241
594
407
1,242
7%
6%
6%
6%
31 Mar
2014
258
629
432
1,319
Year on Year
31 Mar
YoY
2013
Change
224
521
366
1,111
15%
21%
18%
19%
Includes revenues from value-added services such as internet, access, data centers and bundled services.
The fixed line data segment continued its revenue growth with P1.3 billion, 19% higher year-onyear while compared to previous quarter, the increase was 6%. The sustained growth of fixed line
data was a product of the Company‟s continued dedication to expand its portfolio focusing on
Globe‟s corporate clients‟ increasing demand for solutions to address its critical business needs
such as sales and marketing, intercompany communications, database management and data
storage. Likewise, the expansion of the local IT Enabled Service (ITES) industry which includes
call centers and Business Process Outsourcing (BPO) companies has also helped drive the growth
of the corporate data business.
SEC Form 17Q – 1Q 2014
30
Fixed line Voice
Quarter on Quarter
1Q
2014
Year on Year
4Q
QoQ
2013
Change
(%)
31 Mar
31 Mar
YoY
2014
2013
Change
(%)
Cumulative Voice Subscribers Net (End of period)1……………………………
Average Revenue Per Subscriber (ARPU) …
ARPU 2………………………………………
Average Monthly Churn Rate ..……………....
611,743
594,527
3%
611,743
687,775
-11%
367
2.38%
357
3.57%
3%
367
2.38%
309
4.22%
19%
1
Includes DUO and SuperDUO subscribers
ARPU is computed by dividing recurring gross service revenues (gross of interconnect expenses) segment by the average number of
the segment’s subscribers and then dividing the quotient by the number of months in the period.
2
Total fixed line voice revenues improved year-on-year due to higher ARPU by 19%. Meanwhile
the quarterly increase was due mainly to increase in subscriber base.
SEC Form 17Q – 1Q 2014
31
OTHER GLOBE GROUP REVENUES
International Long Distance (ILD) Services
Globe Group
Quarter on Quarter
1Q
2014
Year on Year
4Q
QoQ
2013
Change
(%)
31 Mar
2014
31 Mar
YoY
2013
Change
(%)
Total ILD Revenues (Php Mn) ……………………...
2,805
3,004
-7%
2,805
2,839
-1%
Average collection rates for the period (Php to US$1)
44.643
43.520
3%
44.643
40.803
9%
610
562
48
643
567
76
-5%
-1%
-37%
610
562
48
505
428
77
21%
31%
-38%
11.63
7.43
11.63
5.56
Total ILD Minutes (in million minutes) ……………
Inbound…………………………………………………
Outbound.………………………………………………
ILD Inbound / Outbound Ratio (x) …………………….
Both Globe and Innove offer ILD voice services which cover international call services between
the Philippines to more than 200 destinations with over 700 roaming partners. This service
generates revenues from both inbound and outbound international call traffic, with pricing based
on agreed international termination rates for inbound traffic revenues and NTC-approved ILD
rates for outbound traffic revenues.
On a consolidated basis, ILD voice revenues from the mobile and fixed line businesses slightly
declined year on year by 1% and down by 7% quarter-on-quarter to P2,805 million from P3,004
million. The decline versus last quarter was mainly due to decline in ILD traffic.
Meanwhile, Globe sustained its promotion on OFW SIM packs and the discounted call rate offers
such as IDD Sakto Calls (per-second IDD), TipIDD card, and IDD Tingi – the first bulk IDD
service which can be purchased via registration and through AMAX retailers nationwide. This is
available in two denominations: P20 for 5-minute calls to US, Canada, Hong Kong Singapore and
Taiwan, and P30 for 3-minute calls to Saudi Arabia, UAE and Kuwait. In addition, The Filipino
Seafarer SIM enables Filipino seafarers around the world to keep in touch with their loved ones
back home at cheaper rates for as low as US$0.20 per minute while sending SMS for only
US$0.10 per sms. Subscribers who will avail of the SIM will get two numbers in one SIM – an
international mobile number and a Philippine Globe mobile number. Globe and TM subscribers
calling the Globe Seafarer SIM are only charged at local rates. The Globe Local UK SIM card
alternatively gives Filipinos one affordable rate of only 10 pence for each call or text sent to
Globe or TM number in the Philippines as well as calls and text to all UK networks. Subscribers
also pay only 10 pence for every MB of mobile internet. Moreover, Globe once again expanded
its international footprint with the launch of Globe local Italy SIM last November 24, 2013.
Filipino communities in Italy can now enjoy calls to Globe in the Philippines for just five Euro
cents per minute, the lowest among all Italian mobile operators. This 2014, Globe recently
announced the partnership with Ingenium Outsourcing Services, S.L.U to be able to launch soon
the Local Spain SIM card, which will be the 8th country where Globe would have an international
retail presence. Globe Duo International was further expanded to include Japan with the launch of
Duo Japan during the period, which allows calls from Japan to the Philippines, via a Japanese
number assigned to a Globe or TM mobile number, to be charged on local rates.
SEC Form 17Q – 1Q 2014
32
GROUP OPERATING EXPENSES
For the three months ended, Globe‟s total costs and expenses, including depreciation, amounted to
=18,502 million, down by 7% from last year‟s P
P
=19,999 million driven by lower depreciation charges
and decline in interconnect costs which fully offset the increases from all other expense line items.
Higher depreciation in 2013 is mainly due to the accelerated depreciation related to the network
modernization projects. On a sequential basis, total spending declined by 10% primarily across all
expense line items except for subsidy, repairs and maintenance and utilities.
Globe Group
Quarter on Quarter
(PhpMn)
1Q
2014
4Q
QoQ
2013
Change
(%)
Year on Year
31 Mar
2014
31 Mar
YoY
2013
Change
(%)
Cost of sales…………………………………………..
Less: Non-service revenues………………..………..
Subsidy……………………………….....................
2,867
1,130
1,737
2,946
1,573
1,373
-3%
-28%
27%
2,867
1,130
1,737
2,707
1,102
1,605
6%
3%
8%
Interconnect…………………………………………...
Selling, Advertising and Promotions…………………
Re-contracting………………………………………..
Staff Costs ……………………………………………
Utilities, Supplies & Other Administrative Expenses...
Rent…………………………………………………...
Repairs and Maintenance……………………………..
Provisions ………………………………………………..
Services and Others…………………………………...
Operating Expenses…………………………………
2,057
1,131
600
1,950
1,145
916
1,089
790
3,019
12,697
2,304
1,490
718
2,130
1,127
935
911
771
3,263
13,649
-11%
-24%
-16%
-8%
2%
-2%
20%
2%
-7%
-7%
2,057
1,131
600
1,950
1,145
916
1,089
790
3,019
12,697
2,195
808
489
1,666
1,001
840
966
487
2,535
10,987
-6%
40%
23%
17%
14%
9%
13%
62%
19%
16%
Depreciation and Amortization……………….……
Affected by network modernization……………….
Others………………………………………………
4,068
512
3,556
5,607
733
4,874
-27%
-30%
-27%
4,068
512
3,556
7,407
3.062
4,345
-45%
-83%
-18%
Costs and Expenses………………………………….
18,502
20,629
-10%
18,502
19,999
-7%
Interconnect
Interconnect charges declined year-on-year and quarter-on-quarter by 6% and 11% respectively
due to lower inter-network traffic on domestic services mainly on Mobile Telephony‟s local voice.
Subsidy
Total subsidy increased by 8% year-on-year to P
=1,737 million from P
=1,605 million in same period
last year mainly for Postpaid on account of higher mix of mid to high-end plan subscription (from
51% in 1Q‟13 to 53% in 1Q‟14), strong postpaid mobile gross activations, and the increase in
broadband acquisitions. On a sequential basis, subsidy likewise increased by 27% on the back of
increased gross acquisitions during the period as partly offset by volume rebates pertaining to
2013 handset purchases.
SEC Form 17Q – 1Q 2014
33
Marketing
Selling, advertising and promotions, which account for 8% of total operating expenses grew yearon-year by 40% to P
=1,131 million this period from P
=808 million as of March 2013 driven by
increased advertising spend on all business segments and higher commissions following growth in
@Home acquisitions. However, on a sequential basis, costs declined by 24% mainly across all
brands as partly offset by higher commissions. Higher fourth quarter marketing expenses was due
to catch up accruals booked in December on various marketing programs.
Re-contracting
Total re-contracting costs as of first quarter, increased by 23% to P
=600 million from P
=489 million
in the same period last year. The increase in re-contracting costs is mainly due to the increasing
base of re-contracting subs who availed of handset upgrade. On a sequential basis, re-contracting
cost declined by 16% from P
=718 million in the fourth quarter. Higher re-contracting cost in the
fourth quarter was mainly due to the launch of various apple products (iPhone 5s and 5c; iPad
mini with Retina display; iPad Air) during the fourth quarter.
Staff Costs
Staff costs which accounted for 14% of total operating expenses, increased by 17% to P
=1,950
million from P
=1,666 in 2013 due to average headcount increase (from 5,902 in 2013 to 6,381 in
2014), higher corporate incentives as well as the exercise of employee stock options. Compared
to last quarter, staff costs declined by 8%.
Utilities, Supplies and Other Administrative Expenses
Utilities, supplies and other administrative expenses showed a year-on-year increase of 14% or
=144 million and quarter-on-quarter growth of 2% or P
P
=18 million mainly to support Globe‟s
growing network, as well as on-off costs to support recovery efforts on Yolanda affected areas.
Rent
Rent expenses which account for 6% of operating expenses and subsidy increased to P
=916 million
representing 9% year-on-year growth from P
=840 million in the first three months of 2013, largely
on higher service vehicle leased and increasing IP port requirements, local tielines and co-location
fees. However, first quarter lease expenses registered a 2% decline from P
=935 million last quarter.
Provisions
This account includes provisions related to trade, non-trade and traffic receivables and inventory.
Overall, total provisions increased by 62% or P
=303 million higher than same period last year
mainly from trade provisions due to the continued growth in postpaid revenues year-on-year and
higher traffic provisions as cushioned by lower inventory-related provisions. However, compared
to the preceding quarter, total provisions increased by 2%.
Repairs and Maintenance
Repairs and maintenance, which accounted for 8% of total operating expenses and subsidy stood
at P
=1,089 million, 13% higher against same period last year‟s P
=966 million and 20% higher
SEC Form 17Q – 1Q 2014
34
quarter-on-quarter, given costs related to maintenance agreements for Globe‟s IT system, support
facilities and outside plant equipment.
Services and Others
Services and other expenses which accounted for 21% of total operating expenses and subsidy
grew by 19% from P
=2,535 million in the same period of 2013 to P
=3,019 million as of first quarter
this year. This was mainly attributed to higher professional fees, higher cost per hour of
contracted services and customer contact services largely due to high volume of postpaid calls
both regular and high-end accounts. Costs likewise were driven by higher freight charges and
subscriber line installations as partly countered by lower payments for taxes and licenses.
However, on a sequential basis, services and other expenses declined by 7% from P
=3,263 million
last quarter, given that fourth quarter spend was higher due to catch-up accruals.
Depreciation and Amortization
Depreciation and amortization expenses dropped year-on-year and quarter-on-quarter by 45% and
27%, respectively as bulk of the accelerated depreciation charges related to network and IT
transformation projects was booked in 2013. Normal course depreciation charges were likewise
lower as some assets were determined at end-of-useful life at the end of 2013.
SEC Form 17Q – 1Q 2014
35
OTHER INCOME STATEMENT ITEMS
Other income statement items include net financing costs, net foreign exchange gain (loss),
interest income and net property and equipment related income (charges) as shown below:
Globe Group
Quarter on Quarter
(PhpMn)
1Q
2014
Financing Costs – net
Interest Expense………………………….......
Gain / (Loss) on derivative instruments – net
Swap costs and other financing costs……......
Foreign Exchange (loss).…..………………..
Year on Year
4Q
QoQ
2013
Change
(%)
31 Mar
2014
31 Mar
YoY
2013
Change
(%)
(488)
61
(67)
(73)
(523)
(40)
(67)
(155)
-7%
-254%
1%
-53%
(488)
61
(67)
(73)
(507)
(68)
(65)
(49)
-4%
-190%
3%
48%-
(567)
(785)
-28%
(567)
(690)
Foreign Exchange gain …………………….....
Interest Income …………………………….....
Others – net…………………………………....
164
(19)
160
9
2%
-313%
164
(19)
180
6
-18%
-9%
-377%
Total Other (Expenses) Income……………....
(422)
(616)
-31%
(422)
(503)
-16%
Globe Group‟s non-operating charges for the first quarter posted a 16% or P81 million year-onyear decline to close the period at P422 million following net forex/MTM loss of ₱12M vs. last
year‟s loss of ₱117M coupled with lower interest expense due to17% lower interest bearing loan
and lower interest rate on dollar loans by 1.7%. Likewise, this quarter showed a decline of 31% in
non-operating charges from P616 million last quarter, due mainly to lower forex losses/MTM
following 1Q 2014 peso depreciation against the US$ by ₱1.14 or 3% vs. 4Q 2013 coupled with
lower interest expense.
(See related discussion on derivative instruments and swap costs in the Foreign Exchange and
Interest Rate Exposure section).
SEC Form 17Q – 1Q 2014
36
LIQUIDITY AND CAPITAL RESOURCES
Globe Group
Balance Sheet Data (PhpMn)
Total Assets ……………………………………………………
Total Debt ……………………………………………………..
Total Stockholders‟ Equity ……………………………………
Financial Ratios (x)
Total Debt to EBITDA ………………………………………...
Debt Service Coverage…………………………………………
Interest Cover (Gross) …………………………………………
Debt to Equity (Gross) ………………………………………...
Debt to Equity (Net) 1………………………………………….
Total Debt to Total Capitalization (Book) …………………….
Total Debt to Total Capitalization (Market) ...………………...
1
31 Mar
2014
31 Dec
2013
YoY
change (%)
160,029
69,884
39,667
159,079
69,301
41,639
1%
1%
-5%
1.91
2.23
12.92
1.76
1.60
0.64
1.90
2.83
12.54
1.66
1.49
0.62
0.24
0.24
Net debt is calculated by subtracting cash, cash equivalents and short term investments from total debt.
Globe‟s balance sheet and cash flows remain strong with ample liquidity and gearing comfortably
within bank covenants albeit higher year-on-year with the additional debt raised as a result of
Globe‟s transformation and modernization program.
Globe Group‟s consolidated assets as of 31 March 2014 amounted to P160,029 million compared
to P159,079 million as of end 2013. Consolidated cash, cash equivalents and short term
investments (including investments in assets available for sale and held to maturity investments)
was at P6,503 million at the end of first quarter this year compared to P7,421 million as of endDecember 2013.
The Company‟s gearing levels have been increasingly optimized over the past few years with the
raised dividend payouts and higher proportion of debt to total capitalization. Globe ended the first
three months of the year with gross debt to equity ratio on a consolidated basis at 1.76:1 and is
well within the 2:1 debt to equity limit dictated by Globe‟s debt covenants. Meanwhile net debt to
equity ratio was at 1.60:1 as of end-March 2014 and 1.49:1 as of end December 2013.
The financial tests under Globe‟s loan agreements include compliance with the following ratios:




Total debt to equity not exceeding 2:1;
Total debt to EBITDA not exceeding 3:1;
Debt service coverage 1 exceeding 1.3 times; and
Secured debt ratio 2 not exceeding 0.2 times.
As of 31 March 2014, Globe is well within the ratios prescribed under its loan agreements.
1
Debt service coverage ratio is defined as the ratio of EBITDA to required debt service, where debt service includes subordinated debt
but excludes shareholder loans.
2
Secured debt ratio is defined as the ratio of the total amount for the period of all present consolidated obligations for payment,
whether actual or contingent which are secured by Permitted Security Interest as defined in the loan agreement to the total amount of
consolidated debt. Globe has no secured debt as of 31 March 2014.
SEC Form 17Q – 1Q 2014
37
Consolidated Net Cash Flows
Globe Group
(PhpMn)
31 Mar
2014
31 Mar
2013
YoY change
(%)
Net Cash from Operating Activities……………………………..
Net Cash from Investing Activities……………………………...
8,546
(4,288)
9,153
(6,637)
-7%
-35%
Net Cash from Financing Activities……………………………..
(5,223)
(2,582)
102%
Net cash flows provided by operating activities as of end-March this year stood at P8,546 million,
down by 7% year on year.
Meanwhile, net cash used in investing activities amounting to P4,288 million was lower by 35%.
Consolidated cash capital expenditures as of end of first quarter this year amounted to P
=4,688
million, down by 32% from last year‟s P
=6,917 million.
Globe Group
(PhpMn)
Capital Expenditures (Cash) ……………………………………..
Increase (Decrease) in Liabilities related to Acquisition of PPE
& capitalized Asset Retirement Obligations……………………...
Total Capital Expenditures1 ……………………………………
Total Capital Expenditures / Service Revenues(%)...……………
31 Mar
2014
4,688
31 Mar
2013
6,917
YoY change
(%)
1,188
974
22%
5,876
7,891
-26%
25%
37%
-32%
1
Consolidated capital expenditures include property and equipment, intangibles and capitalized borrowing costs acquired as of report
date regardless of whether payment has been made or not.
Consolidated net cash from financing activities increased by 102% year on year, driven by higher
repayments of borrowings, dividends and interest payments. Consolidated total debt, likewise,
slightly increased by 1% from P
=69,301 million in year-end 2013 to P
=69,884 million this period.
44% of US$ consolidated loans have been effectively converted to PHP via US$165Mn in
currency hedges. After swaps, effectively 13% of total debt are denominated in US$ as of endMarch 2014.
SEC Form 17Q – 1Q 2014
38
Below is the schedule of debt maturities for Globe for the years stated below based on total
outstanding debt as of 31 March 2014:
Year Due
2014………….…………………………………………………………………………...
2015.……………………………………………………………………………………...
2016………………………………………………………………………………………
2017 through 2023 ………………………………………………………………………
Total
Principal *
(US$ Mn)
171
137
169
1,091
1,568
* Principal amount before debt issuance costs.
On March 6, 2013, Globe Telecom signed a USD 75 million 3-year term loan with floating interest
rate with Bank of Tokyo - Mitsubishi UFJ, Ltd., Singapore Branch as lender. The purpose of the
loan is to fund Globe Telecom‟s capital expenditures.
On March 22, 2013, Globe Telecom signed a USD 120 million 7-year term loan with floating
interest rate with Metrobank as lender to finance Globe Telecom‟s capital expenditures.
On July 17, 2013, the Globe Group issued P
=7,000.00 million fixed rate bond. The amount
comprises P
=4,000.00 million and P
=3,000.00 million bonds due in 2020 and 2023, with interest rate
of 4.8875% and 5.2792%, respectively. The net proceeds of the issue shall be used to partially
finance the Globe Group‟s capital expenditure requirements in 2013.
On July 29, 2013, Globe Telecom signed a USD 40 million 3-year term loan with floating interest
rate with Mizuho Bank Ltd. as lender to prepay and refinance certain debts.
On December 4, 2013, Globe Telecom signed a P
=7,000.00 million 7-year term loan credit facility
with fixed interest rate with Land Bank of the Philippines as lender. The proceeds of the loan shall
be used to partially finance Globe Telecom‟s general financing and corporate requirements for
capital expenditures.
On April 8, 2014, further to the approval of BOD dated February 10, 2014 on the amendment of
Articles of Incorporation to reclassify unissued common and voting preferred shares into nonvoting preferred shares, the BOD approved the issuance, offer and listing of up to
20 million non-voting preferred shares, with an issue volume of P
=10.00 Billion. The non-voting
preferred shares shall be redeemable, non-convertible, non-voting, cumulative and may be issued in
series. The key features of the Non-Voting Preferred Shares include:




Dividends – To be determined by the Board of Directors at the time of issue
Liquidation Preference - The Non-Voting Preferred Shares shall rank ahead of the
Common Shares and equally with the Voting Preferred Shares.
Redemption - The Non-Voting Preferred Shares shall be redeemable at the Corporation‟s
option at such times and price(s) as may be determined by the Board of Directors at the
time of issue, which price may not be less than the par value thereof plus accrued
dividends.
Pre-emptive Rights - The Non-Voting Preferred Shares shall not have any pre-emptive
rights over any sale or issuance of any share in the Corporation‟s capital stock.
SEC Form 17Q – 1Q 2014
39
Stockholders‟ equity as of end-March 2014 was down by 5% from P41,639 million to P39,667
million. Globe‟s capital stock consists of the following:
Preferred Shares
Preferred stock at a par value of P5 per share of which 158 million shares are outstanding out
of a total authorized of 250 million shares.
Preferred stock has the following features:
a. Issued at P5 par;
b. Dividend rate to be determined by the BOD at the time of Issue;
c. One preferred share is convertible to one common share starting at the end of the 10 th year
of the issue date at a price to be determined by the Globe Telecom‟s BOD at the time of
issue which shall not be less than the market price of the common share less the par value
of the preferred share;
d. Call option – Exercisable any time by Globe Telecom starting at the end of the 5th year
from issue date at a price to be determined by the BOD at the time of the issue;
e. Eligibility of Investors – Only Filipino citizens or corporations or partnerships wherein
60% of the voting stock of voting power is owned by Filipino;
f. With voting rights;
g. Cumulative and non-participating;
h. Preference as to dividends and in the event of liquidation; and
i. No preemptive right to any share issue of Globe Telecom, and subject to yield protection
in case of change in tax laws.
The dividends for preferred shares are declared upon the sole discretion of the Globe
Telecom‟s BOD.
To date, none of the preferred shares have been converted to common shares.
Common Shares
Common shares at par value of P50 per share of which 132 million are issued and outstanding
out of a total authorized of 180 million shares.
Cash Dividends
The dividend policy of Globe Telecom as approved by the Board of Directors is to declare cash
dividends to its common stockholders on a regular basis as may be determined by the Board. The
dividend payout rate starting 2006 is approximately 75% of prior year‟s net income payable semiannually in March and September of each year. This is reviewed annually, taking into account
Globe Telecom‟s operating results, cash flows, debt covenants, capital expenditure levels and
liquidity.
On November 6, 2009, the Board of Directors amended the dividend payment rate from 75% to a
range of 75% - 90% of prior year‟s net income.
On November 8, 2011, the Board of Directors amended the Company‟s dividend policy to be
based on core instead of reported net income. Pay-out range remains at 75% to 90%. This is to
ensure that dividends will remain sustainable and yields competitive despite the expected nearterm decline in net income that would result from the accelerated depreciation charges related to
assets that will be decommissioned as part of the Company‟s network and IT transformation
SEC Form 17Q – 1Q 2014
40
programs. As currently defined, core net income excludes all foreign exchange, mark-to-market
gains and losses, as well as non-recurring items.
On 10 February 2014, the Board of Directors approved the declaration of the 1st semi-annual cash
dividend of P37.50 per common share, payable to shareholders on record as of 26 February 2014.
Total dividends of about P4.97 billion were paid on 20 March 2014.
Consolidated Return on Average Equity (ROE) registered at 29% as of end-March 2014,
compared to 6% in the same period in 2013 using net income and based on average equity
balances for the year ended. Using annualized core net income excluding the effects of accelerated
depreciation on net income, return on average equity for the first quarter this year was at 33%
compared to 28% of 2013.
Accordingly, consolidated basic earnings per common share were P22.15 and P4.88, while
consolidated diluted earnings per common share were P22.13 and P4.88 as of end-March 2014 and
2013, respectively.
SEC Form 17Q – 1Q 2014
41
FINANCIAL RISK MANAGEMENT
FOREIGN EXCHANGE EXPOSURE
Foreign exchange risks are managed such that USD inflows from operations (transaction
exposures) are balanced or offset by the net USD liability position of the company (translation
exposures). Globe Group‟s objective is to maintain a position which results in, as close as
possible, a neutral effect to the P&L relative to movements in the foreign exchange market.
Transaction exposures
Globe has natural net US$ inflows arising from its operations. Consolidated foreign currencylinked revenues1 was at 17% of total gross service revenues for the periods ended 31 March 2014
and 2013. In contrast, Globe‟s foreign-currency linked expenses were at 9% and 11% of total
operating expenses for the same periods ended, respectively.
The US$ flows are as follows:
US$ and US$ Linked Revenues
US$ Operating Expenses
US$ Net Interest Expense
March 2014
P3.84 billion
P0.93 billion
P0.06 billion
Due to these net US$ inflows, an appreciation of the Peso has a negative impact on Globe‟s Peso
EBITDA. Globe occasionally enters into forward contracts to hedge against a peso appreciation.
A total of US$4.5 million of contracts remain outstanding as of end-March 2014. The mark-tomarket of the outstanding forwards stood at a gain of P1.4 million as of end-March 2014.
There were no realized gains or losses from forward contracts for the 1st quarter of 2014.
1
Includes the following revenues:
(1) billed in foreign currency and settled in foreign currency, and
(2) billed in Pesos at rates linked to a foreign currency tariff and settled in Pesos
SEC Form 17Q – 1Q 2014
42
Translation Exposures
Globe also has US$ assets and liabilities which are revalued at market rates every period. These
are as follows:
US$ Assets
US$ Liabilities
Net US$ Liability Position
March 2014
US$189 million
US$576 million
US$387 million
For accounting purposes, the foreign currency assets and liabilities are revalued at the exchange
rate at the end of each reporting period. Given the net US$ liability position, a depreciation of the
peso results in a revaluation or forex loss in our P&L. As of March 2014, the Philippine Peso
stood at P44.809 to the US dollar, a weakening versus the 2013 year-end rate of P44.398. Due to
the weakening peso, the Globe Group charged a total of P73 million in net foreign exchange losses
to current operations for the first quarter of 2014.
In April 2013, Globe entered into cross currency swaps amounting to US$125 million in April
2013 and US$40 million in February 2014 to hedge the FX and interest rate risk on some of its
USD loans. The MTM of the swap contracts stood at a gain of P595 million as of end-March
2014.
Globe also entered into a short-term US$30 million swap contract (sell USD spot, buy USD
forward), to manage its USD and PHP cash flow requirements.
INTEREST RATE EXPOSURE
Interest rate exposures are managed via targeted levels of fixed versus floating rate debt that are
meant to achieve a balance between cost and volatility. Globe‟s policy is to maintain between 4488% of its peso debt in fixed rate, and between 31-62% of its US$ debt in fixed rate.
As of end-March 2014, Globe has a total of US$26 million in US$ interest swaps, P3.8 billion in
PHP interest rate swaps and $165 million in cross currency swaps that were entered into contracts
to achieve these targets. The US$ and Peso swaps fixed some of the Company‟s outstanding
floating rate debts with quarterly or semi-annual payment intervals up to April 2020.
As of end-March 2014, 66% (excluding short-term debt) of peso debt is fixed, while 59% of USD
debt is fixed after swaps.
The MTM of the interest swap contracts (not including the currency swap contracts) stood at a loss
of P88 million as of end-March 2014.
SEC Form 17Q – 1Q 2014
43
CREDIT EXPOSURES FROM FINANCIAL INSTRUMENTS
Outstanding credit exposures from financial instruments are monitored daily and allowable
exposures are reviewed quarterly.
For investments, the Globe Group does not have investments in foreign securities (bonds,
collateralized debt obligations (CDO), collateralized mortgage obligations (CMO), or any
instruments linked to the mortgage market in the US). Globe‟s excess cash is invested in short
term bank and SDA deposits.
The Globe Group also does not have any investments or hedging transactions with investment
banks. Derivative transactions as of the end of the period are with large foreign and local banks.
Furthermore, the Globe Group does not have instruments in its portfolio which became inactive in
the market nor does the company have any structured notes which require use of judgment for
valuation purposes.
VALUATION OF DERIVATIVE TRANSACTIONS
The company uses valuation techniques that are commonly used by market participants and that
have been demonstrated to provide reliable estimates of prices obtained in actual market
transactions. The company uses readily observable market yield curves to discount future receipts
and payments on the transactions. The net present value of receipts and payments are translated
into Peso using the foreign exchange rate at time of valuation to arrive at the mark to market value.
For derivative instruments with optionality, the company relies on valuation reports of its
counterparty banks, which are the company‟s best estimates of the close-out value of the
transactions.
Gains (losses) on derivative instruments represent the net mark-to-market (MTM) gains (losses) on
derivative instruments. As of 31 March 2014, the MTM value of the derivatives of the Globe
Group amounted to a gain of P520 million while net gain on derivative instruments arising from
changes in MTM reflected in the consolidated income statements amounted to P61 million.
To measure riskiness, the Company provides a sensitivity analysis of its profit and loss from
financial instruments resulting from movements in foreign exchange and interest rates. The
interest rate sensitivity estimates the changes to the following P&L items, given an indicated
movement in interest rates: (1) interest income, (2) interest expense, (3) mark-to-market of
derivative instruments. The foreign exchange sensitivity estimates the P&L impact of a change in
the USD/PHP rate as it specifically pertains to the revaluation of the net unhedged liability
position of the company, and foreign exchange derivatives.
SEC Form 17Q – 1Q 2014
44
LEGAL, REGULATORY AND CORPORATE DEVELOPMENTS
A. On 23 July 2009, the NTC issued NTC Memorandum Circular (MC) No. 05-07-2009
(Guidelines on Unit of Billing of Mobile Voice Service). The MC provides that the
maximum unit of billing for the cellular mobile telephone service (CMTS) whether
postpaid or prepaid shall be six (6) seconds per pulse. The rate for the first two (2) pulses,
or equivalent if lower period per pulse is used, may be higher than the succeeding pulses
to recover the cost of the call set-up. Subscribers may still opt to be billed on a one (1)
minute per pulse basis or to subscribe to unlimited service offerings or any service
offerings if they actively and knowingly enroll in the scheme. In compliance with NTC
MC 05-07-2009, Globe refreshed and offered to the general public its existing per-second
rates that, it bears emphasizing, comply with the NTC Memorandum Circular. Globe made
per second charging for Globe-Globe/TM-TM/Globe available for Globe Subscribers
dialing prefix 232 (GLOBE) OR 803 plus 10-digit TM or Globe number for TM
subscribers. The NTC, however, contends that Globe‟s offering does not comply with the
circular and with the NTC‟s Order of 7 December 2009 which imposed a three-tiered rate
structure with a mandated flag-down of P3.00, a rate of P0.4375 for the 13th to the 160th
second of the first minute and P0.65 for every 6-second pulse thereafter. On 9 December
2009, the NTC issued a Cease and Desist Order requiring the carriers to refrain from
charging under the previous billing system or regime and refund consumers.
Globe maintains that the Order of the NTC of 7 December 2009 and the Cease and Desist
Order are void as being without basis in fact and law and in violation of Globe‟s rights to
due process. Globe, Smart, Sun and CURE all filed petitions before the Court of Appeals
seeking the nullification of the questioned orders of the NTC. On 18 February 2010, the
Court of Appeals issued a Temporary Restraining Order preventing the NTC from
enforcing the disputed Order.
On 25 May 2010, the CA issued a writ of preliminary injunction directing the NTC to
cease and desist from enforcing their assailed Order/s. On 28 December 2010, the CA
rendered a Decision declaring the questioned decisions invalid for being violative of the
Petitioners‟ right to due process, among others. The Petitioners and the NTC filed their
respective Motions for Partial Reconsideration. The motions were DENIED by the CA in
an Order dated 19 January 2012. Due to lack of material time, the NTC and the Petitioners
seasonably filed their respective Motions for Extension of Time to File Petition for
Review with the Supreme Court. The Movants are expected to file their respective
petitions within the month of March 2012.
Globe believes that its legal position is strong and that its offering is compliant with the
NTC‟s Memorandum Circular 05-07-2009, and therefore believes that it would not be
obligated to make a refund to its subscribers. If, however, Globe would be held as not
being in compliance with the circular, Globe may be contingently liable to refund to any
complaining subscribers any charges it may have collected in excess of what it could have
charged under the NTC‟s disputed Order of 7 December 2009, if indeed it is proven by
any complaining party that Globe charged more with its per second scheme than it could
have under the NTC‟s 6-second pulse billing scheme stated in the disputed Order.
Management has no estimate of what amount this could be at this time.
B. On 22 May 2006, Innove received a copy of the Complaint of Subic Telecom Company
(“Subictel”), Inc., a subsidiary of PLDT, seeking an injunction to stop the Subic Bay
SEC Form 17Q – 1Q 2014
45
Metropolitan Authority and Innove from taking any actions to implement the Certificate of
Public Convenience and Necessity granted by SBMA to Innove. Subictel claimed that the
grant of a CPCN allowing Innove to offer certain telecommunications services within the
Subic Bay Freeport Zone would violate the Joint Venture Agreement (“JVA”) between
PLDT and SBMA. The Supreme Court ordered the reinstatement of the case and has
forwarded it to the NTC-Olongapo for trial.
C. PLDT and its affiliate, Bonifacio Communications Corporation (BCC) and Innove and
Globe are in litigation over the right of Innove to render services and build
telecommunications infrastructure in the Bonifacio Global City. In the case filed by
Innove before the NTC against BCC, PLDT and the Fort Bonifacio Development
Corporation (FBDC), the NTC has issued a Cease and Desist Order preventing BCC from
performing further acts to interfere with Innove‟s installations in the Bonifacio Global
City.
In the case filed by PLDT against the NTC in Branch 96 of the Regional Trial Court
(RTC) of Quezon City, where PLDT sought to obtain an injunction to prevent the NTC
from hearing the case filed by Innove, the RTC denied the prayer for a preliminary
injunction and the case has been set for further hearings. PLDT has filed a Motion for
Reconsideration and Globe has intervened in this case. In a resolution dated 28 October
2008, the RTC QC denied BCC‟s motion for the issuance of a temporary restraining order
(TRO). The case is still pending with the QC RTC.
In the case filed by BCC against FBDC, Globe Telecom and Innove, Bonifacio
Communications Corp. before the Regional Trial Court of Pasig, which case sought to
enjoin Innove from making any further installations in the BGC and claimed damages
from all the parties for the breach of the exclusivity of BCC in the area, the court did not
issue a Temporary Restraining Order and has instead scheduled several hearings on the
case. In a resolution dated 28 October 2008, the RTC QC denied BCC‟s motion for the
issuance of a temporary restraining order (TRO). The case is still pending with the RTC
Pasig.
On 11 November 2008, Bonifacio Communications Corp. (BCC) filed a criminal
complaint against the officers of Innove Communications Inc., the Fort Bonifacio
Development Corporation (FBDC) and Innove contractor Avecs Corporation for malicious
mischief and theft arising out of Innove‟s disconnection of BCC‟s duct at the Net Square
buildings. The accused officers filed their counter-affidavits and are currently pending
before the Prosecutor‟s Office of Pasig. The case is still pending resolution with the
Office of the City Prosecutor.
On 21 January 2011, BCC and PLDT filed with the Court of Appeals a Petition for
Certiorari and Prohibition against NTC, et al. seeking to annul the Orders of the NTC
dated 28 October 2008 directing BCC, PLDT and FBDC to comply with the provisions of
NTC MC 05-05-02 and the CEASE AND DESIST from performing further acts that will
prevent Innove from implementing and providing telecommunications services in the Fort
Bonifacio Global City pursuant to the authorization granted by the NTC. BCC and PLDT
anchor their petition on the grounds that: 1) the NTC has no jurisdiction over BCC it being
a non telecommunications entity; 2) the NTC violated BCC and PLDT‟s right to due
process; and 3) there was no urgency or emergency for the issuance of the cease and desist
order. The case is pending with the court of appeals.
SEC Form 17Q – 1Q 2014
46
On April 25, 2011, Innove Communications, filed its comment on the case filed by PLDT
that seeks to ban all Globe services from the Bonifacio Global City before the CA‟s Tenth
Division. In its comment, Globe argued that it is in the public‟s best interest that open
access and free competition among telecom operators be allowed at the Bonifacio Global
City.
On August 16, 2011, the Ninth Division of the CA ruled that PLDT‟s case against Innove
and the National Telecommunications Commission (NTC) lacked merit, and thus denied
the petition and DISMISSED the case. PLDT and its co-petitioner, BCC file their motion
for reconsideration. The same is still pending resolution.
Other Developments
In November 2004, Globe and seven other leading Asia Pacific mobile operators („JV
partners‟) signed an agreement („JV agreement‟) to form Bridge Alliance. The joint
venture company operates through a Singapore-incorporated company, Bridge Mobile Pte.
Limited (BMPL) which serves as a commercial vehicle for the JV partners to build and
establish a regional mobile infrastructure and common service platform to deliver different
regional mobile services to their subscribers. The Bridge Alliance currently has a
combined customer base of over 250 million subscribers among its partners in India,
Thailand, Hong Kong, South Korea, Macau, Philippines, Malaysia, Singapore, Australia,
Taiwan and Indonesia.
Globe Group has a ten percent (10%) stake in BMPL. The other joint venture partners
each with equal stake in the alliance include SK Telecom, Co. Ltd., Advanced Info
Service Public Company Limited, Bharti Airtel Limited, Maxis Communications Berhad,
Optus Mobile Pty. Limited, Singapore Telecom Mobile Pte, Ltd., Taiwan Mobile Co. Ltd.,
PT Telekomunikasi Selular and CSL Ltd. Under the JV Agreement, each partner shall
contribute USD4.00 million based on an agreed schedule of contribution. Globe Telecom
may be called upon to contribute on dates to be determined by the JV. As of December 31,
2013 and 2012, Globe Telecom has invested a total of USD2.20 million (₱111.28 million),
in the joint venture
In February 2013, Globe obtained approval from its Board of Directors to invest in a
Philippine entity to be named as Taodharma, Inc. to explore growth opportunities in the
mobile market.
Bayantel Update
On September 2013, Globe received a Resolution issued by Branch 158 of the Regional
Trial Court in Pasig City. This is the court having jurisdiction over the debts of Bayan
Telecommunications, Inc. (Bayantel) and its corporate rehabilitation proceedings. The
Resolution granted the joint motion filed by Globe and Bayantel to amend current debt
restructuring plan and implement a new Master Restructuring Agreement for all
Bayantel‟s creditors. The Amendments principally involve a conversion of up to 69% of
the debt into Bayantel shares comprising up to 56.6% of Bayantel‟s capital stock, on a
fully diluted basis. Assuming that debt to equity conversion occur to their fullest extent,
the Amendments will reduce Bayantel‟s outstanding principal debt by 69% from the
equivalent of approximately US$423.3 to approximatedly US$131.3 million. The
Amendments also facilitate the entry of Globe into Bayantel as a shareholder and are
SEC Form 17Q – 1Q 2014
47
expected to assure Bayantel‟s successful rehabilitation. In addition to Globe, the debt to
equity conversion of the new debt restructuring terms will apply to all Bayantel‟s
creditors.
On October 1, 2013, Globe acquired 38% interest in BTI following the conversion of its
unsustainable debt (Tranche B) into 45 million common shares equity based on the
confirmation of the Court dated August 27, 2013 on the Amended Rehabilitation Plan.
Globe Telecom intends to further convert portion of Tranche A debt, which together with
the converted Tranche B debt would represent more than 50% of BTI‟s outstanding shares
upon certain regulatory approvals.
Details on these transactions have been extensively discussed in the disclosures filed with
the SEC and PSE and may be accessed from the PSE and Company websites.
SEC Form 17Q – 1Q 2014
48
OTHER RELEVANT INFORMATION
MAJOR STOCKHOLDERS
The following are the major stockholders of Globe Telecom as of 31 March 2014:
% of
Common
% of
Preferred
Stockholders
Preferred
Shares
Common
Shares
Shares
Ayala Corp.
40,328,090
30.4%
SingTel
62,646,487
47.2%
Asiacom
158,515,021
100%
Public
29,702,051
22.4%
Total
132,676,628
100%
158,515,021
100%
Total
% of
Total
40,328,090
62,646,487
158,515,021
29,702,051
291,191,649
13.9%
21.5%
54.4%
10.2%
100%
BOARD OF DIRECTORS (BOD)
As of 31 March 2014, the members of the Board of Directors of the Globe Group are:
Name
Position
Jaime Augusto Zobel de Ayala
Chairman
Gerardo C. Ablaza, Jr.
Co-Vice Chairman
Mark Chong Chin Kok
Co-Vice Chairman
Romeo L. Bernardo
Director
Ernest L. Cu
Director, President and CEO
Delfin L Lazaro
Director
Xavier P. Loinaz*
Director
Guillermo D. Luchangco*
Director
Manuel A. Pacis*
Director
Tay Soo Meng
Director
Fernando Zobel de Ayala
Director
* Independent Director
Key Officers - Globe
Name
Ernest L. Cu
Alberto M. de Larrazabal
Henry Rhoel R. Aguda
Vicente Froilan M. Castelo
Marisalve Ciocson-Co
Rebecca V. Eclipse
Gil B. Genio
Carmina J. Herbosa
Renato M. Jiao
Bernard P. Llamzon
Solomon M. Hermosura
Position
President and Chief Executive Officer
Chief Finance Officer
Chief Information Officer and SVP, Information Systems Group
General Legal Counsel and SVP, Corporate and Legal Services Group
Compliance Officer and Assistant Corporate Secretary and VP, Legal Services
Chief Customer Experience Officer and EVP, Office of Strategy Management
Chief Operating Officer for Business and International Markets and Chief
Strategy Officer
Chief Audit Executive and SVP, Internal Controls Group
Chief Human Resources Officer
EVP, Consumer Sales
Corporate Secretary
Consultants
Name
Peter Bithos
Chee Loo Fun
Rodolfo A. Salalima
Robert Tan
SEC Form 17Q – 1Q 2014
Position
Chief Operating Advisor
Senior Adviser for Consumer Marketing
Chief Legal Counsel and Senior Advisor
Chief Technical Advisor
49
Pursuant to the requirement ofthe Securities Regulation Code, the registrant has duly caused tnis
report to be signed on its behalfby the undersigned thereunto duly authorized.
P^ct^nt PTT ORF TF.T .RCOM. INC.
CARMELI PAULINE M. BRIONES
Hp.ad - Financial Control
ZABAL
12 May 2014
12 May 2014
ChiefFinancial Officer
SEC Form 17Q-1Q 2014
50
ANNEX TO THE MD&A SECTION
1) Any events that will trigger direct or contingent financial obligation that is material to
the company, including any default or acceleration of an obligation:
Changes in Accounting Policies
The accounting policies adopted in the preparation of the interim condensed consolidated
financial statements are consistent with those followed in the preparation of the Globe
Group‟s consolidated financial statements as of and for the year ended December 31,
2013, except for the adoption of the following new and amended standards effective as of
January 1, 2014.
The nature and impact of each new standard and amendments is described below:

Amendments to PFRS 10, PFRS 12 and PAS 27, Investment Entities
They provide an exception to the consolidation requirement for entities that meet the
definition of an investment entity under PFRS 10. The exception to consolidation
requires investment entities to account for subsidiaries at fair value through profit or
loss. It is not expected that this amendment would be relevant to Globe Group since
none of the entities in the Group would qualify to be an investment entity under PFRS
10.

Amendments to PAS 36, Impairment of Assets - Recoverable Amount Disclosures for
Non-Financial Assets
These amendments remove the unintended consequences of PFRS 13, Fair Value
Measurement, on the disclosures required under PAS 36. In addition, these
amendments require disclosure of the recoverable amounts for the assets or cashgenerating units (CGUs) for which impairment loss has been recognized or reversed
during the period. The amendments have no impact on the Globe Group‟s financial
position or performance.

Philippine Interpretation IFRIC 21, Levies
IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that
triggers payment, as identified by the relevant legislation, occurs. For a levy that is
triggered upon reaching a minimum threshold, the interpretation clarifies that no
liability should be anticipated before the specified minimum threshold is reached. The
adoption of the standard has no impact to the Globe Group.

Amendments to PAS 39, Financial Instruments: Recognition and Measurement Novation of Derivatives and Continuation of Hedge Accounting
These amendments provide relief from discontinuing hedge accounting when novation
of a derivative designated as a hedging instrument meets certain criteria. The Globe
Group has not novated its derivatives during the current period. However, these
amendments would be considered for future novations.

Amendments to PAS 32, Financial Instruments: Presentation - Offsetting Financial
Assets and Financial Liabilities
SEC Form 17Q – 1Q 2014
51

The amendments clarify the meaning of “currently has a legally enforceable right to
set-off” and the criteria for simultaneous settlement mechanisms of clearing houses to
qualify for offsetting. The amendments affect presentation only and have no impact
on the Globe Group‟s financial position or performance.
2) Description of material commitments and general purpose of such commitments.
Material off-balance sheet transactions, arrangements, obligations and other
relationships with unconsolidated entities or other persons created during the period:
For details on material commitments and arrangements, see Notes 7 and 11 in the attached
Notes to the Financial Statements.
Globe Telecom and Innove, in their regular conduct of business, enter into transactions with
their major stockholders, AC and STI, joint ventures and certain related parties.
Globe Telecom also has investments in the following:
 Investment in BTI
On October 1, 2013, Globe Telecom acquired 38% interest in BTI following the
conversion of its unsustainable debt (Tranche B) into 45 million common shares based
on the confirmation of the court dated August 27, 2013 of the Amended Rehabilitation
Plan. Globe Telecom will further convert its share of the Tranche A debt upon certain
regulatory approvals. Globe Telecom‟s acquisition of BTI is intended to increase its
current data and DSL businesses using BTI‟s existing platform.
As of March 31, 2014, the equity in BTI was recognized as investment in an associate
carried at acquisition cost valued at nil. BTI remains in a capital deficiency after
Tranche B conversion with a negative book value of common shares at P
=47.45 per
share.
The accumulated unrecognized share in net loss and other comprehensive income as
of March 31, 2014 amounted to P
=488.68 million and P
=31.88 million, respectively.
As of March 31, 2014, the National Telecommunications Commission (NTC)
approval for the change in control of BTI is still pending.

Investment in Automatic Fare Collection System Inc. (AFCS)
 On January 30, 2014, following a competitive bidding process, the Department of
Transportation and Communication (DOTC) awarded to AF consortium,
composed of AC Infrastructure Holdings Corp., BPI Card Finance Corp., Globe
Telecom, Inc., Meralco Financial Services, Inc., Metro Pacific Investments Corp.,
and Smart Communications, Inc. the rights to design, build and operate the P
=1.72
billion automated fare collection system (AFCS). This is a public-private
partnership project intended to upgrade and consolidate the fare collection systems
of the three urban rail transit systems which presently serve Metro Manila.

On February 10, 2014, AF Consortium incorporated a special purpose company,
Automated Fare Collection Services, Inc., which will assume the rights and
obligations of the concessionaire. These rights and obligations include the
construction and establishment of systems, infrastructure including
implementation, test, acceptance and maintenance plans, and operate the urban
transit system for a period of 10 years.
SEC Form 17Q – 1Q 2014
52


Globe Telecom‟s investment in the consortium amounts to P
=300 million or 20%
interest.
Investment in FPSI
On December 19, 2013, Kickstart entered into a Memorandum of Agreement with
FPSI and FPSI‟s stockholders to subscribe for 5.07 million common shares of FPSI
for a total subscription price of P
=18.88 million to obtain 65% cumulative ownership.
FPSI is engaged in acquiring, publishing rights to produce, publish, market and sell
printed and electronic books and other electronic documents and content for
international and domestic sales.
On February 4, 2014, Kickstart entered into a subscription agreement with FPSI for
the acquisition of 2.08 million common shares for a total subscription price of P
=8.22
million which constitutes 40% ownership.
The purchase price consideration had been allocated to the identifiable assets and
liabilities of FPSI on the basis of its book values. As permitted by the revised PFRS 3,
Kickstart will recognize any adjustment to those provisional values as an adjustment
to goodwill upon determining the final fair values of identifiable assets and liabilities
within 12 months from acquisition date.
From the date of acquisition, FPSI has contributed P
=0.11 million of revenue and a loss
before income tax of P
=1.10 million.
Net cash outflow from the acquisition is as follows (in thousand pesos):
Total cash paid on acquisition
Cash and cash equivalents acquired from Flipside
Net cash outflow on acquisition
=3,580
P
(198)
=3,382
P
3) Any significant elements of income or loss that did not arise from the registrant's
continuing operations:
Not applicable.
4) Any seasonal aspects that had a material effect on the financial condition or results of
operations:
There are no seasonal aspects that have material effects in the financial statements.
SEC Form 17Q – 1Q 2014
53
Globe Telecom, Inc. and Subsidiaries
Interim Condensed Consolidated Financial Statements
March 31, 2014 and 2013
GLOBE TELECOM, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Notes
ASSETS
Current Assets
Cash and cash equivalents
Receivables
Inventories and supplies
Derivative assets
Prepayments and other current assets
13
5
Assets classified as held for sale
Noncurrent Assets
Property and equipment
Intangible assets and goodwill
Investments in an associate and joint ventures
Deferred income tax assets - net
Derivative assets
Other noncurrent assets
3
4
6
13
5
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued expenses
Notes payable
Provisions
Derivative liabilities
Income tax payable
Unearned revenues
Current portion of long-term debt
7
13
7
Liabilities directly associated with the assets
classified as held for sale
Noncurrent Liabilities
Long-term debt - net of current portion
Deferred income tax liabilities - net
Derivative liabilities
Other long-term liabilities - net of current
portion
Total Liabilities
Equity
Attributable to equity holders of the Parent
Paid-up capital
Cost of share-based payments
Other reserves
Retained earnings
Noncontrolling interest
Total Equity
Total Liabilities and Equity
7
13
8
8
December 31
March 31
2013
2013
2014
(Unaudited)
(Audited)
(Unaudited)
(In Thousand Pesos)
P
=6,503,207
14,166,010
3,437,406
18,556
10,716,456
34,841,635
–
34,841,635
P
=6,662,470
11,660,109
3,225,355
6,424
10,157,546
31,711,904
778,321
32,490,225
P
=7,420,735
15,200,923
3,544,887
1,834
9,462,823
35,631,202
–
35,631,202
111,493,335
4,453,616
199,852
2,005,244
669,950
6,365,518
125,187,515
P
=160,029,150
100,096,684
5,587,227
208,238
726,021
–
7,464,767
114,082,937
P
=146,573,162
110,424,072
3,840,660
162,754
1,916,878
553,562
6,549,805
123,447,731
P
=159,078,933
P
=40,681,792
2,240,450
331,136
168,603
2,319,940
2,451,491
6,116,941
54,310,353
P
=29,573,630
2,045,900
307,433
261,575
2,270,765
2,454,721
10,269,612
47,183,636
P
=39,486,830
5,219,900
294,700
219,694
1,028,263
2,759,644
5,980,300
54,989,331
–
54,310,353
427,942
47,611,578
–
54,989,331
61,527,092
–
–
52,108,352
974,351
4,104
58,100,749
–
–
4,524,949
66,052,041
120,362,394
3,906,875
56,993,682
104,605,260
4,349,602
62,450,351
117,439,682
34,473,266
204,236
(699,168)
5,689,580
39,667,914
(1,158)
39,666,756
P
=160,029,150
34,119,694
452,237
(479,886)
7,875,857
41,967,902
–
41,967,902
P
=146,573,162
34,402,396
261,144
(739,575)
7,715,286
41,639,251
–
41,639,251
P
=159,078,933
See accompanying Notes to Interim Condensed Consolidated Financial Statements.
GLOBE TELECOM, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three-Month Period Ended
March 31
2013
2014
Notes (Unaudited) (Unaudited)
(In Thousand Pesos)
REVENUES
Service revenues
Nonservice revenues
P
=23,230,138
1,129,991
24,360,129
P
=21,368,505
1,102,188
22,470,693
5
163,705
24,981
–
119,694
308,380
179,990
12,340
10,794
93,739
296,863
9
9,880,974
8,406,376
3, 4
3, 4
512,268
3,555,211
2,867,478
2,057,295
833,683
628,723
26,936
20,362,568
3,061,824
4,345,021
2,707,425
2,195,423
496,171
689,414
–
21,901,654
4,305,941
865,902
1,464,892
(107,943)
1,356,949
1,229,751
(1,019,891)
209,860
2,948,992
656,042
64,832
11,485
(16,461)
(19,449)
40,407
45,790
784
13,816
(13,737)
46,653
TOTAL COMPREHENSIVE INCOME
P
=2,989,399
P
=702,695
Total comprehensive income (loss) attributable to:
Equity holders of the Parent
Noncontrolling interest
P
=2,990,052
(653)
P
=702,695
–
P
=2,989,399
P
=702,695
INCOME
Interest income
Gains on disposals of property and equipment - net
Equity in net income of joint ventures
Other income - net
COSTS AND EXPENSES
General, selling and administrative
Depreciation and amortization
Incremental effect of network modernization
Others
Cost of sales
Interconnect costs
Impairment losses and others
Financing costs
Equity in net losses of joint ventures
9
9
INCOME BEFORE INCOME TAX
PROVISION FOR (BENEFIT FROM) INCOME TAX
Current
Deferred
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS)
Items to be reclassified to profit or loss in subsequent periods:
Transactions on cash flow hedges - net
Exchange differences arising from translations of foreign investments
Changes in fair value of available-for-sale investment in equity securities
Income tax effect
(Forward)
8
-2Three-Month Period Ended
March 31
2013
2014
Notes (Unaudited) (Unaudited)
Earnings Per Share
Basic
Diluted
Cash dividends declared per common share
See accompanying Notes to Interim Condensed Consolidated Financial Statements.
12
8
P
=22.15
P
=22.13
P
=4.88
P
=4.88
P
=37.50
P
=33.50
GLOBE TELECOM, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
As of January 1, 2014
Total comprehensive income for the period
Dividends on common stock
Exercise of stock options
Noncontrolling interest arising from a
business combination
As of March 31, 2014
For the Three-Month Period Ended March 31, 2014 (Unaudited)
Attributable to Equity Holders of the Parent
Additional
Cost of
NonCapital
Paid-in Share-Based
Other
Retained
controlling
Notes
Stock
Capital Payments
Reserves
Earnings
Total
Interest
Total
(In Thousand Pesos)
P
=7,422,360 P
=26,980,036
P
=261,144 (P
=739,575) P
=7,715,286 P
=41,639,251
P
=– P
=41,639,251
8
–
–
–
40,407
2,949,645
2,990,052
(653)
2,989,399
8
–
–
–
– (4,975,351) (4,975,351)
– (4,975,351)
4,046
66,824
(56,908)
–
–
13,962
–
13,962
6
–
–
P
=7,426,406 P
=27,046,860
Notes
As of January 1, 2013
Total comprehensive income for the period
Dividends on common stock
Exercise of stock options
As of March 31, 2013
(Forward)
8
8
–
P
=204,236
–
–
–
(P
=699,168) P
=5,689,580 P
=39,667,914
(505)
(505)
(P
=1,158) P
=39,666,756
For the Three-Month Period Ended March 31, 2013 (Unaudited)
Additional
Cost of
Capital
Paid-in Share-Based
Other
Retained
Stock
Capital
Payments
Reserves
Earnings
Total
(In Thousand Pesos)
=7,412,866 P
P
=26,683,110
=472,911
P
(P
=526,539) P
=11,655,643 P
=45,697,991
–
–
–
46,653
656,042
702,695
–
–
–
–
(4,435,828)
(4,435,828)
602
23,116
(20,674)
–
–
3,044
=7,413,468 P
P
=26,706,226
=452,237
P
(P
=479,886)
=7,875,857 P
P
=41,967,902
-2-
Notes
Capital
Stock
For the Year Ended December 31, 2013 (Audited)
Additional
Cost of
Paid-in Share-Based
Other
Retained
Reserves
Capital
Payments
Earnings
Total
(In Thousand Pesos)
As of January 1, 2013
Total comprehensive income for the year
Dividends on:
Common stock
Preferred stock
Cost of share-based payments
Exercise of stock options
As of December 31, 2013
See accompanying Notes to Interim Condensed Consolidated Financial Statements.
8
8
=7,412,866
P
–
=26,683,110
P
–
=472,911
P
–
(P
=526,539)
(213,036)
=11,655,643 =
P
P45,697,991
4,960,245
4,747,209
–
–
–
9,494
=7,422,360
P
–
–
–
296,926
=26,980,036
P
–
–
50,000
(261,767)
=261,144
P
–
–
–
–
(P
=739,575)
(8,876,764) (8,876,764)
(23,838)
(23,838)
–
50,000
–
44,653
=7,715,286 =
P
P41,639,251
GLOBE TELECOM, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation and amortization
Interest expense
Interest income
Foreign exchange losses - net
Loss (gain) on derivative instruments - net
Impairment losses on property and equipment
and intangible assets
Provisions for claims and assessments
Equity in net losses (income) of joint ventures
Gains on disposals of property and equipment - net
Operating income before working capital changes
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables
Inventories and supplies
Prepayments and other current assets
Increase (decrease) in:
Accounts payable and accrued expenses
Unearned revenues
Other long-term liabilities
Net cash generated from operations
Income taxes paid
Net cash flows provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to:
Property and equipment
Intangible assets
Investments in an associate and joint ventures
Decrease in other noncurrent assets
Proceeds from sale of property and equipment
Interest received
Acquisition of subsidiary, net of cash acquired
Net cash flows used in investing activities
(Forward)
Three-Month Period Ended
March 31
2013
2014
(Unaudited)
(Unaudited)
(In Thousand Pesos)
=4,305,941
P
=865,902
P
3, 4
9
4,067,479
488,007
(163,705)
73,316
(59,512)
7,406,845
506,775
(179,990)
49,192
64,812
9
9
43,530
36,436
26,936
(24,981)
8,793,447
9,373
104,242
(10,794)
(12,340)
8,804,017
875,377
107,482
(1,258,820)
431,840
(1,149,179)
2,087,497
398,365
(308,153)
110,840
8,718,538
(172,460)
8,546,078
(679,716)
(48,182)
(48,659)
9,397,618
(244,658)
9,152,960
(4,687,916)
(26,727)
(60,000)
438,348
26,792
24,646
(3,382)
(4,288,239)
(6,917,020)
(11,834)
3
3, 15
4
–
241,523
14,434
36,083
–
(6,636,814)
-2-
Notes
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings:
Long-term
Repayments of borrowings:
Long-term
Short-term
Payments of dividends to stockholders:
Common
Preferred
Exercise of stock options
Interest paid
Net cash flows used in financing activities
Three Months Ended
March 31
2013
2014
(Unaudited)
(Unaudited)
(In Thousand Pesos)
7
=4,000,000
P
=3,052,875
P
(597,500)
(3,000,000)
(415,057)
(4,975,351)
13,962
(664,453)
(5,223,342)
(4,435,828)
(33,145)
3,044
(753,511)
(2,581,622)
(965,503)
(65,476)
47,975
(31,809)
7
–
8
NET DECREASE IN CASH AND CASH EQUIVALENTS
NET FOREIGN EXCHANGE DIFFERENCE
CASH AND CASH EQUIVALENTS AT BEGINNING OF
THE PERIOD
CASH AND CASH EQUIVALENTS AT END OF THE
PERIOD
See accompanying Notes to Interim Condensed Consolidated Financial Statements.
–
7,420,735
P
=6,503,207
6,759,755
P
=6,662,470
GLOBE TELECOM, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. Basis of Financial Statement Preparation
The interim condensed consolidated financial statements of Globe Telecom, Inc. and
Subsidiaries (the “Globe Group”) as of and for the quarter ended March 31, 2014 and 2013
were authorized for issue in accordance with a resolution of the Board of Directors (BOD) on
May 12, 2014.
Globe Telecom, Inc. (herein referred to as “Globe Telecom” or “Globe”) is a company
incorporated and domiciled in the Philippines whose shares are publicly traded. The principal
activities of Globe and its subsidiaries are described in Note 14.
The accompanying interim condensed consolidated financial statements have been prepared in
accordance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting.
Accordingly, the interim condensed consolidated financial statements do not include all of the
information required in the annual audited financial statements, and should be read in
conjunction with the Globe Group’s annual financial statements as at December 31, 2013.
The preparation of the financial statements in compliance with Philippine Financial Reporting
Standards (PFRS) requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. The estimates and
assumptions used in the accompanying interim condensed consolidated financial statements
are based upon management’s evaluation of relevant facts and circumstances as of the date of
the interim condensed consolidated financial statements. Actual results could differ from such
estimates.
The interim condensed consolidated financial statements include the accounts of Globe
Telecom and its wholly owned subsidiaries, Innove Communications, Inc. (herein referred to
as “Innove”), G-Xchange, Inc. (herein referred to as “GXI”), Entertainment Gateway Group
Corp. (EGGC), GTI Business Holdings, Inc. (herein referred to as “GTI”) and its subsidiaries
and Kickstart Ventures, Inc. (herein referred to as “Kickstart”) and its subsidiary, collectively
referred to as “Globe Group”. Kickstart subsidiary was consolidated starting February 2014.
GTI wholly-owned subsidiaries are: GTI Corporation (GTIC US), Globe Telecom HK Limited
(GTHK) and Globetel European Limited (GTEU). GTEU wholly owned subsidiaries are UK
Globetel Limited (UKGT), Globe Mobile’ Italy S.r.l. (GMI) and Globetel Internacional
European España, S.L.
In February 2014, Kickstart acquired 40% equity interest in Flipside Publishing Services, Inc.
(FPSI) which is classified as a subsidiary based on its assessment of relevant facts and
circumstances.
The interim condensed consolidated financial statements are presented in Philippine Peso (P
=),
the Globe’s functional currency, and rounded to the nearest thousands except when otherwise
indicated.
-2-
2. Accounting Policies
2.1 Changes in Accounting Policies
The accounting policies adopted in the preparation of the interim condensed consolidated
financial statements are consistent with those followed in the preparation of the Globe Group’s
consolidated financial statements as of and for the year ended December 31, 2013, except for
the adoption of the following new and amended standards effective as of January 1, 2014.
The nature and impact of each new standard and amendment is described below:
·
Amendments to PFRS 10, PFRS 12 and PAS 27, Investment Entities
They provide an exception to the consolidation requirement for entities that meet the
definition of an investment entity under PFRS 10. The exception to consolidation requires
investment entities to account for subsidiaries at fair value through profit or loss. It is not
expected that this amendment would be relevant to Globe Group since none of the entities
in the Group would qualify to be an investment entity under PFRS 10.
·
Amendments to PAS 36, Impairment of Assets - Recoverable Amount Disclosures for
Non-Financial Assets
These amendments remove the unintended consequences of PFRS 13, Fair Value
Measurement, on the disclosures required under PAS 36. In addition, these amendments
require disclosure of the recoverable amounts for the assets or cash-generating units
(CGUs) for which impairment loss has been recognized or reversed during the period. The
amendments have no impact on the Globe Group’s financial position or performance.
·
Philippine Interpretation IFRIC 21, Levies
IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that
triggers payment, as identified by the relevant legislation, occurs. For a levy that is
triggered upon reaching a minimum threshold, the interpretation clarifies that no liability
should be anticipated before the specified minimum threshold is reached. The adoption of
the standard has no impact to the Globe Group.
·
Amendments to PAS 39, Financial Instruments: Recognition and Measurement - Novation
of Derivatives and Continuation of Hedge Accounting
These amendments provide relief from discontinuing hedge accounting when novation of
a derivative designated as a hedging instrument meets certain criteria. The Globe Group
has not novated its derivatives during the current period. However, these amendments
would be considered for future novations.
·
Amendments to PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets
and Financial Liabilities
The amendments clarify the meaning of “currently has a legally enforceable right to setoff” and the criteria for simultaneous settlement mechanisms of clearing houses to qualify
for offsetting. The amendments have no impact on the Globe Group’s financial position
or performance.
-3-
3. Property and Equipment
The rollforward analysis of property and equipment follows:
March 31, 2014
Buildings and
Telecommunications
Leasehold
Equipment Improvements
Cost
At January 1
Additions
Retirements/disposals
Reclassifications/adjustments (Note 4)
At March 31
Accumulated Depreciation
and Amortization
At January 1
Depreciation and amortization
Affected by network modernization
Others
Retirements/disposals
Reclassifications/adjustments
At March 31
Impairment Losses
At January 1
Additions (Note 9)
Write-off/adjustments
At March 31
Net Book Value at March 31
Investments in
Office Transportation
Cable Systems
Equipment
Equipment
(Unaudited and In Thousand Pesos)
Land
Assets Under
Construction
Total
= 199,195,469
P
1,454,778
(1,045,418)
1,364,212
200,969,041
=34,805,499
P
70,928
–
558,722
35,435,149
= 18,979,908
P
28,376
–
26,818
19,035,102
= 9,223,985
P
25,921
(13,068)
55,506
9,292,344
=2,338,024
P
80,362
(66,694)
(2,614)
2,349,078
= 1,600,413
P
–
–
3,374
1,603,787
= 20,318,463
P
4,188,842
(271)
(3,077,788)
21,429,246
=286,461,761
P
5,849,207
(1,125,451)
(1,071,770)
290,113,747
141,480,546
16,003,575
8,689,260
7,544,300
1,700,206
–
–
175,417,887
367,383
2,467,878
(1,044,285)
(20,738)
143,250,784
54
415,997
–
201
16,419,827
–
292,300
–
5
8,981,565
4,454
166,377
(13,039)
433
7,702,525
–
59,358
(65,153)
–
1,694,411
–
–
–
–
–
–
–
–
–
–
371,891
3,401,910
(1,122,477)
(20,099)
178,049,112
243,822
–
(92,032)
151,790
= 57,566,467
P
–
–
–
–
=19,015,322
P
–
–
–
–
= 10,053,537
P
3,182
–
–
3,182
= 1,586,637
P
–
–
–
–
=654,667
P
–
–
–
–
= 1,603,787
P
372,798
43,530
–
416,328
= 21,012,918
P
619,802
43,530
(92,032)
571,300
₱111,493,335
March 31, 2013
Cost
At January 1
Additions
Retirements/disposals
Reclassifications/adjustments (Note 4)
At March 31
Accumulated Depreciation
and Amortization
At January 1
Depreciation and amortization
Affected by network modernization
Others
Retirements/disposals
Reclassifications/adjustments
At March 31
Impairment Losses
At January 1
Additions (Note 9)
At March 31
Net Book Value at March 31
Telecommunications
Equipment
Buildings and
Leasehold
Improvements
=202,201,632
P
3,132,525
(2,297)
776,631
206,108,491
=28,852,761
P
153,829
–
124,730
29,131,320
=14,144,444
P
244,259
–
106,403
14,495,106
=7,951,568
P
76,422
(472)
980,774
9,008,292
143,047,869
14,551,973
6,485,043
2,530,333
3,503,976
(2,297)
14,492
149,094,373
25
328,716
–
(1,262)
14,879,452
138,069
–
138,069
=56,876,049
P
–
–
–
=14,251,868
P
Investments in
Office
Transportation
Cable Systems
Equipment
Equipment
(Unaudited and In Thousand Pesos)
Land
Assets Under
Construction
Total
=2,311,840
P
95,181
(15,359)
(460)
2,391,202
=1,573,994
P
–
–
–
1,573,994
=17,596,471
P
4,177,296
–
(4,350,776)
17,422,991
=274,632,710
P
7,879,512
(18,128)
(2,362,698)
280,131,396
6,834,232
1,680,991
–
–
172,600,108
(6,295)
231,260
–
–
6,710,008
12,284
161,332
(472)
(1,058)
7,006,318
–
57,407
(13,267)
(181)
1,724,950
–
–
–
–
–
–
–
–
–
–
2,536,347
4,282,691
(16,036)
11,991
179,415,101
–
–
–
=7,785,098
P
3,182
–
3,182
=1,998,792
P
–
–
–
=666,252
P
–
–
–
=1,573,994
P
468,987
9,373
478,360
=16,944,631
P
610,238
9,373
619,611
=100,096,684
P
Office
Equipment
Transportation
Equipment
Land
Assets Under
Construction
December 31, 2013
Telecommunications
Equipment
Buildings and
Leasehold Investments in
Improvements Cable Systems
Total
(Audited and In Thousand Pesos)
Cost
At January 1
Additions
Retirements/disposals
Reclassifications/
adjustments (Note 4)
At December 31
Accumulated Depreciation
and Amortization
At January 1
Depreciation and amortization
Incremental effect of network
modernization
Others
(Forward)
=
P202,201,632
13,784,885
(22,281,856)
=
P28,852,761
348,336
(3,649)
=
P14,144,444
251,136
–
=
P7,951,568
284,219
(32,931)
=
P2,311,840
257,635
(243,245)
=
P1,573,994
–
–
=
P17,596,471
20,754,416
(1,015)
=
P274,632,710
35,680,627
(22,562,696)
5,490,808
199,195,469
5,608,051
34,805,499
4,584,328
18,979,908
1,021,129
9,223,985
11,794
2,338,024
26,419
1,600,413
(18,031,409)
20,318,463
(1,288,880)
286,461,761
143,047,869
14,551,973
6,485,043
6,834,232
1,680,991
–
–
172,600,108
7,747,607
12,938,614
23,880
1,436,398
1,259
1,394,939
56,978
833,998
–
247,540
–
–
–
–
7,829,724
16,851,489
-4Telecommunications
Equipment
Buildings and
Leasehold Investments in
Improvements Cable Systems
Office
Equipment
Transportation
Equipment
Land
Assets Under
Construction
Total
(Audited and In Thousand Pesos)
Retirements/disposals
Reclassifications/
adjustments
At December 31
Impairment Losses
At January 1
Additions (reversals)
Write-off/adjustments
At December 31
Net Book Value at
December 31
(P
=22,239,228)
(P
=3,386)
=
P–
(P
=32,139)
(P
=229,768)
=
P–
=
P–
(P
=22,504,521)
(14,316)
141,480,546
(5,290)
16,003,575
808,019
8,689,260
(148,769)
7,544,300
1,443
1,700,206
–
–
–
–
641,087
175,417,887
138,069
123,852
(18,099)
243,822
–
–
–
–
–
–
–
–
3,182
–
–
3,182
–
–
–
–
–
–
–
–
468,987
(97,540)
1,351
372,798
=
P57,471,101
=
P18,801,924
=
P10,290,648
=
P1,676,503
=
P637,818
=
P1,600,413
=
P19,945,665
610,238
26,312
(16,748)
619,802
=
P110,424,072
In the last quarter of 2011, Globe Group has announced to undertake a network and IT
transformation program for an estimated investment of USD790.00 million over the next two
to three years. External partners were engaged in 2011 to help manage the modernization
effort. In the first quarter of 2012, the estimated useful life (EUL) of certain wireless and
wireline telecommunications equipment were changed as a result of continuing upgrade and
migration to a modernized network. The net effect of the change in EUL resulted in higher
depreciation expense of P
=371.89 million and P
=2,536.35 million for the three-month period
ended March 31, 2014 and 2013, respectively.
Assets under construction include intangible components of a network system which are to be
reclassified to depreciable intangible assets only when assets become available for use
(see Note 4).
The Globe Group uses its borrowed funds to finance the acquisition of property and equipment
and bring it to its intended location and working condition. Borrowing costs incurred relating
to these acquisitions were included in the cost of property and equipment using 4.66%, 2.29%
and 2.83% capitalization rates for the three-month period ended March 31, 2014 and 2013 and
for the year ended December 31, 2013, respectively. The Globe Group’s total capitalized
borrowing costs amounted to =
P219.48 million, P
=181.06 million and =
P823.90 million for the
three-month period ended March 31, 2014 and 2013, and for the year ended
December 31, 2013, respectively.
The Globe Group is currently recovering decommissioned network assets affected by the
conversion to new upgraded equipment from its continuing network modernization project,
including computer related assets, from its IT transformation project.
The carrying value of the hardware infrastructure and information equipment held under
finance lease (included under “Telecommunications equipment” and “Asset under
construction”) as of March 31, 2014 and 2013, and December 31, 2013 amounted to
=
P958.63 million, P
=738.09 million and =
P753.85 million, respectively.
4. Intangible Assets and Goodwill
In the first quarter of 2012, the EUL of certain wireless licenses were changed as a result of
continuing upgrade and migration to a modernized network. The net effect of the change in
EUL resulted to higher amortization expense of =
P140.38 million and =
P525.48 million for the
three-month period ended March 31, 2014 and 2013, respectively.
-5-
The rollforward analysis of intangible assets and goodwill follows:
March 31, 2014
Licenses and
Application
Software
Cost
At January 1
Additions
Reclassifications/
adjustments (Note 3)
At March 31
Accumulated Amortization
At January 1
Amortization
Affected by network
modernization
Others
Reclassifications/adjustments
At March 31
Net Book Value at March 31
Exclusive
Total
Customer
Dealership
Intangible
Contracts
Assets
Right
(Unaudited and In Thousand Pesos)
Goodwill
Total
Intangible
Assets and
Goodwill
P
= 13,681,879
26,727
P
= 28,381
–
P
= 67,552
–
P
= 13,777,812
26,727
P
= 327,125
–
P
= 14,104,937
26,727
834,562
14,543,168
–
28,381
29,544
97,096
864,106
14,668,645
–
327,125
864,106
14,995,770
10,232,761
28,381
3,135
10,264,277
–
10,264,277
140,377
149,535
(15,801)
10,506,872
P
= 4,036,296
–
–
–
28,381
P
=–
–
3,766
–
6,901
P
= 90,195
140,377
153,301
(15,801)
10,542,154
P
= 4,126,491
–
–
–
–
P
= 327,125
140,377
153,301
(15,801)
10,542,154
P
= 4,453,616
March 31, 2013
Licenses and
Application
Software
Cost
At January 1
Additions
Reclassifications/
adjustments (Note 3)
At March 31
Accumulated Amortization
At January 1
Amortization
Affected by network
modernization
Others
Reclassifications/adjustments
At March 31
Net Book Value at March 31
Total
Intangible
Customer
Assets
Goodwill
Contracts
(Unaudited and In Thousand Pesos)
Total
Intangible
Assets and
Goodwill
P
=11,260,680
11,834
P
=28,381
–
P
=11,289,061
11,834
P
=327,125
–
P
=11,616,186
11,834
2,371,335
13,643,849
–
28,381
2,371,335
13,672,230
–
327,125
2,371,335
13,999,355
7,796,686
25,542
7,822,228
–
7,822,228
525,477
62,330
2,093
8,386,586
P
=5,257,263
–
–
–
25,542
P
=2,839
525,477
62,330
2,093
8,412,128
P
=5,260,102
–
–
–
–
P
=327,125
525,477
62,330
2,093
8,412,128
P
=5,587,227
December 31, 2013
Licenses and
Application
Software
Cost
At January 1
Additions
Retirements/disposals
Reclassifications/adjustments
(Note 3)
At December 31
(Forward)
Exclusive
Total
Customer
Intangible
Dealership
Contracts
Assets
Right
(Audited and In Thousand Pesos)
Goodwill
Total
Intangible
Assets and
Goodwill
P
=11,260,680
30,486
(351,474)
P
=28,381
–
–
P
=–
67,552
–
=
P11,289,061
98,038
(351,474)
P
=327,125
–
–
P
=11,616,186
98,038
(351,474)
2,742,187
13,681,879
–
28,381
–
67,552
2,742,187
13,777,812
–
327,125
2,742,187
14,104,937
-6-
Licenses and
Application
Software
Accumulated Depreciation and
Amortization
At January 1
Amortization:
Incremental effect of
network modernization
Others
Retirements/disposals
Reclassifications/adjustments
(Note 3)
At December 31
Net Book Value at December 31
P
=7,796,686
Exclusive
Total
Intangible
Customer
Dealership
Assets
Contracts
Right
(Audited and In Thousand Pesos)
P
=7,822,228
Goodwill
Total
Intangible
Assets and
Goodwill
=
P–
P
=7,822,228
P
=25,542
=
P–
1,236,242
1,554,065
(351,474)
–
2,839
–
–
3,135
–
1,236,242
1,560,039
(351,474)
–
–
–
1,236,242
1,560,039
(351,474)
(2,758)
10,232,761
P
=3,449,118
–
28,381
=
P–
–
3,135
P
=64,417
(2,758)
10,264,277
P
=3,513,535
–
–
P
=327,125
(2,758)
10,264,277
P
=3,840,660
Intangible assets pertain to (1) telecommunications equipment software licenses, corporate
application software and licenses and other VAS software applications that are not integral to
the hardware or equipment; (2) costs of the web application system developed by a third party
for Kickstart; (3) intangible assets identified to exist during the acquisition of EGG Group for
its existing customer contracts and (4) exclusive dealership right in Taodharma.
5. Loan Receivable from Bayan Telecommunications Inc. (BTI)
For the three-month period ended March 31, 2014 and March 31, 2013, interest income related
to loans receivable from BTI amounted to =
P125.25 million and =
P37.99 million, respectively.
Principal remittances for the three-month period ended March 31, 2014 amounted to
USD$4.37 million (P
=197.21 million).
As of March 31, 2014 and 2013, and December 31, 2013, loans receivable from BTI amounted
to =
P4.87 billion, =
P5.05 billion and =
P5.04 billion, respectively, comprising of principal and
interest due until 2023, with quarterly interest payments and semi-annual principal payments.
The current portion of the BTI loans is classified under “Prepayments and other current assets”
and the noncurrent portion is classified under “Noncurrent assets” in the statements of
financial position.
6. Investments
Investment in BTI
On October 1, 2013, Globe Telecom acquired 38% interest in BTI following the conversion of
its unsustainable debt (Tranche B) into 45 million common shares based on the confirmation
of the court dated August 27, 2013 of the Amended Rehabilitation Plan. Globe Telecom will
further convert its share of the Tranche A debt upon certain regulatory approvals. Globe
Telecom’s acquisition of BTI is intended to increase its current data and DSL businesses using
BTI’s existing platform.
As of March 31, 2014, the equity in BTI was recognized as investment in an associate carried
at acquisition cost valued at nil. BTI remains in a capital deficiency after Tranche B
conversion with a negative book value of common shares at =
P47.45 per share.
The accumulated unrecognized share in net loss and other comprehensive income as of
March 31, 2014 amounted to =
P488.68 million and =
P31.88 million, respectively.
-7-
As of March 31, 2014, the National Telecommunications Commission (NTC) approval for the
change in control of BTI is still pending.
Investment in Automatic Fare Collection System Inc. (AFCS)
On January 30, 2014, following a competitive bidding process, the Department of
Transportation and Communication (DOTC) awarded to AF consortium, composed of AC
Infrastructure Holdings Corp., BPI Card Finance Corp., Globe Telecom, Inc., Meralco
Financial Services, Inc., Metro Pacific Investments Corp., and Smart Communications, Inc.
the rights to design, build and operate the =
P1.72 billion automated fare collection system
(AFCS). This is a public-private partnership project intended to upgrade and consolidate the
fare collection systems of the three urban rail transit systems which presently serve Metro
Manila.
On February 10, 2014, AF Consortium incorporated a special purpose company, Automated
Fare Collection Services, Inc., which will assume the rights and obligations of the
concessionaire. These rights and obligations include the construction and establishment of
systems, infrastructure including implementation, test, acceptance and maintenance plans, and
operate the urban transit system for a period of 10 years.
Globe Telecom’s investment in the consortium amounts to P
=300 million or 20% interest.
Investment in FPSI
On December 19, 2013, Kickstart entered into a Memorandum of Agreement with FPSI and
FPSI’s stockholders to subscribe to 5.07 million common shares of FPSI for a total
subscription price of =
P18.88 million to obtain 65% cumulative ownership.
FPSI is engaged in acquiring, publishing rights to produce, publish, market and sell printed
and electronic books and other electronic documents and content for international and
domestic sales.
On February 4, 2014, Kickstart entered into a subscription agreement with FPSI for the
acquisition of 2.08 million common shares for a total subscription price of =
P8.22 million
which constitutes 40% ownership.
The purchase price consideration had been allocated to the identifiable assets and liabilities of
FPSI on the basis of its book values. As permitted by the revised PFRS 3, Kickstart will
recognize any adjustment to those provisional values as an adjustment to goodwill upon
determining the final fair values of identifiable assets and liabilities within 12 months from
acquisition date.
From the date of acquisition, FPSI has contributed =
P0.11 million of revenue and a loss before
income tax of =
P1.10 million.
Net cash outflow from the acquisition is as follows (in thousand pesos):
Total cash paid on acquisition
Cash and cash equivalents acquired from Flipside
Net cash outflow on acquisition
=3,580
P
(198)
=3,382
P
-8-
7. Notes Payable and Long-term Debt
Notes payable consist of short-term unsecured US dollar and peso-denominated promissory notes
from local banks for working capital requirements.
As of March 31, 2014 and 2013, and December 31, 2013, notes payable amounting to =
P2,240.45
million, =
P2,045.90 million and =
P5,219.90 million, respectively, bear interest ranging from 1.26%
to 1.55%, 1.12% to 1.65% and 1.12% to 3.00%, respectively.
Long-term debt consists of:
December 31
March 31
2013
2013
2014
(Unaudited)
(Audited)
(Unaudited)
(In Thousand Pesos)
Term Loans:
Peso
Dollar
Corporate notes
Retail bonds
Less current portion
P
=31,577,844
14,184,117
4,884,400
16,997,672
67,644,033
6,116,941
P
=61,527,092
=38,035,050
P
8,605,548
5,821,284
9,916,082
62,377,964
10,269,612
=52,108,352
P
=28,018,106
P
14,321,158
4,877,621
16,864,164
64,081,049
5,980,300
=58,100,749
P
The maturities of long-term debt at nominal values as of March 31, 2014 follow (in thousand
pesos):
Due in:
2014
2015
2016
2017
2018 and thereafter
=5,402,643
P
6,136,428
7,554,934
4,924,099
44,011,364
=68,029,468
P
Unamortized debt issuance costs included in the above long-term debt as of March 31, 2014
and 2013, and December 31, 2013 amounted to P
=385.44 million, P
=321.39 million and
=
P402.34 million, respectively.
The interest rates and maturities of the above loans are as follows:
Term Loans:
Peso
Maturities
Interest Rates
2014-2022
1.02% to 6.00% in 2014
0.99% to 6.00% in 2013
1.26% to 1.75% in 2014
1.27% to 1.80% in 2013
1.65% to 8.43% in 2014 and
2013
4.89% to 6.00% in 2014
4.89% to 6.00% in 2013
Dollar
2015-2022
Corporate notes
2014-2016
Retail bonds
2017-2023
-9-
7.1 Term Loans and Corporate Notes
Globe Telecom’s unsecured term loans and corporate notes, which consist of fixed and
floating rate notes and dollar and peso-denominated term loans, bear interest at stipulated
and prevailing market rates.
On March 6, 2013, Globe Telecom signed a USD75 million 3-year term loan with floating
interest rate with Bank of Tokyo - Mitsubishi UFJ, Ltd., Singapore Branch as lender. The
purpose of the loan is to fund Globe Telecom’s capital expenditures.
On March 22, 2013, Globe Telecom signed a USD120 million 7-year term loan with
floating interest rate with Metrobank as lender to finance Globe Telecom’s capital
expenditures.
On July 29, 2013, Globe Telecom signed a USD40 million 3-year term loan with floating
interest rate with Mizuho Bank Ltd. as lender to prepay and refinance certain debts.
On December 4, 2013, Globe Telecom signed a P
=7,000.00 million 7-year term loan credit
facility with fixed interest rate with Land Bank of the Philippines as lender. The proceeds
of the loan shall be used to partially finance Globe Telecom’s general financing and
corporate requirements for capital expenditures.
The loan agreements with banks and other financial institutions provide for certain
restrictions and requirements with respect to, among others, maintenance of financial
ratios and percentage of ownership of specific shareholders, incurrence of additional longterm indebtedness or guarantees and creation of property encumbrances.
As of March 31, 2014, the Globe Group is not in breach of any loan covenants.
7.2 Retail Bonds
On June 1, 2012, Globe Group issued =
P10,000.00 million fixed rate bonds. The amount
comprises =
P4,500.00 million and =
P5,500.00 million fixed rate bonds due in 2017 and
2019, with interest rate of 5.75% and 6.00%, respectively. The net proceeds of the issue
shall be used to partially finance Globe Group’s capital expenditure requirements in 2012.
The five-year and seven-year retail bonds may be redeemed in whole, but not in part,
starting two years before maturity date and on the anniversary thereafter at a price equal to
101.00% and 100.50%, respectively, of the principal amount of the bonds and all accrued
interest to the date of the redemption.
On July 17, 2013, the Globe Group issued =
P7,000.00 million fixed rate bond. The amount
comprises =
P4,000.00 million and =
P3,000.00 million bonds due in 2020 and 2023, with
interest rate of 4.8875% and 5.2792%, respectively. The net proceeds of the issue shall be
used to partially finance the Globe Group’s capital expenditure requirements in 2013.
The seven-year and ten-year retail bonds may be redeemed in whole, but not in part only,
starting two years for the seven-year bonds and three years for the ten-year bonds before
the maturity date and on the anniversary thereafter at a price ranging from 101.0% to
100.5% and 102.0% to 100.5%, respectively, of the principal amount of the bonds and all
accrued interest depending on the year of redemption.
- 10 -
The prepayment feature is assessed as clearly and closely related to the host debt
instrument, and hence need not be separately accounted for at fair value through profit or
loss.
The Globe Group has to meet certain bond covenants including a maximum debt-to-equity
ratio of 2 to 1. As of March 31, 2014, the Globe Group is not in breach of any bond
covenants.
8. Equity and Other Comprehensive Income
8.1 Preferred Shares
On February 10, 2014, the BOD approved the amendment of Articles of Incorporation
(AOI) to reclassify 31 million of unissued common shares with par value of =
P50 per share
and 90 million of unissued voting preferred shares with par value of P
=5 per share into a
new class of 40 million non-voting preferred shares with par value of =
P50 per share.
As of May 12, 2014, Globe Telecom is still processing its application for the
aforementioned amendment of AOI with the Securities and Exchange Commission (SEC).
8.2 Common Stock
The rollforward of outstanding common shares follows:
At beginning of year
Exercise of stock
options
At end of period
March 31, 2014
March 31, 2013
December 31, 2013
Shares
Amount
Shares
Amount
Shares
Amount
(In Thousand Pesos and Number of Shares)
132,596
P
=6,629,785
132,406
P
=6,617,424
132,406
P
=6,620,291
80
132,676
4,076
P
=6,633,861
11
132,417
3,469
P
=6,620,893
190
132,596
9,494
P
=6,629,785
8.3 Cash Dividends
Information of Globe Group’s cash dividends follows:
Per Share
Preferred stock dividends declared on:
November 8, 2013
Common stock dividends declared on:
February 5, 2013
August 6, 2013
February 10, 2014
Date
Amount
Record
Payable
(In Thousand Pesos, Except Per Share Figures)
P
=0.15
P
=23,838
33.50
33.50
37.50
4,435,828
4,440,936
4,975,351
November 22, 2013
December 8, 2013
February 19, 2013
August 22, 2013
February 26, 2014
March 12, 2013
September 22, 2013
March 20, 2014
The dividend policy of Globe Telecom as approved by the BOD is to declare cash
dividends to its common stockholders on a regular basis as may be determined by the
BOD. On November 8, 2011, the BOD approved the current dividend policy of Globe
Telecom to distribute cash dividends at the rate of 75% to 90% of prior year’s core net
income. On August 6, 2013, the BOD further approved the change in distribution from
semi-annual dividend payments to quarterly dividend distributions. However, on
December 10, 2013, the BOD approved to defer the implementation of the quarterly
dividend payout to the second semester of 2014.
The dividend distribution is reviewed annually and subsequently each quarter of the year,
taking into account Globe Telecom’s operating results, cash flows, debt covenants,
capital expenditure levels and liquidity.
- 11 -
8.4 Retained Earnings Available for Dividend Declaration
The total unrestricted retained earnings available for dividend declaration amounted to
P
=3,256.86 million as of March 31, 2014. This amount excludes the undistributed net
earnings of consolidated subsidiaries, accumulated equity in net earnings of joint ventures
accounted for under the equity method, unrealized gains recognized on asset and liability
currency translations, unrealized gains on fair value adjustments and deferred income tax
assets. The Globe Group is also subject to loan covenants that restrict its ability to pay
dividends.
8.5 Other Comprehensive Income
Other Reserves
Cash flow
hedges
As of January 1, 2014
Fair value changes
Transferred to profit or loss
Exchange differences
Income tax effect
As of March 31, 2014
P
= 35,027
83,257
(18,425)
–
(19,449)
P
= 80,410
Cash flow
hedges
As of January 1, 2013
Fair value changes
Transferred to profit or loss
Exchange differences
Income tax effect
As of March 31, 2013
(P
=121,200)
(9,215)
55,005
–
(13,737)
(P
=89,147)
Cash flow
hedges
As of January 1, 2013
Fair value changes
Transferred to profit or loss
Remeasurement losses on defined
benefit plan
Income tax effect
Exchange differences
As of December 31, 2013
For the Three-Month Period Ended March 31, 2014
Exchange
differences arising
Available-forfrom translations Remeasurement
sale financial
of foreign losses on defined
assets
investments
benefit plan
(Unaudited and In Thousand Pesos)
P
= 57,775
(16,461)
–
–
–
P
= 41,314
(P
= 6,020)
–
–
11,485
–
P
= 5,465
(P
= 826,357)
–
–
–
–
(P
= 826,357)
For the Three-Month Period Ended March 31, 2013
Exchange
differences arising
Available-forfrom translations Remeasurement
sale financial
of foreign losses on defined
assets
investments
benefit plan
(Unaudited and In Thousand Pesos)
P
=80,275
13,816
–
–
–
P
=94,091
(P
=3,663)
–
–
784
–
(P
=2,879)
(P
=481,951)
–
–
–
–
(P
=481,951)
For the Year Ended December 31, 2013
Exchange
differences
arising
from translations Remeasurement
of foreign losses on defined
AFS financial
benefit plan
investments
assets
(Audited and In Thousand Pesos)
Total
(P
= 739,575)
66,796
(18,425)
11,485
(19,449)
(P
= 699,168)
Total
(P
=526,539)
4,601
55,005
784
(13,737)
(P
=479,886)
Total
(P
=121,200)
406,194
(183,012)
P
=80,275
(22,500)
–
(P
=3,663)
–
–
(P
=481,951)
–
–
(P
=526,539)
383,694
(183,012)
–
(66,955)
–
P
=35,027
–
–
–
P
=57,775
–
–
(2,357)
(P
=6,020)
(492,009)
147,603
–
(P
=826,357)
(492,009)
80,648
(2,357)
(P
=739,575)
- 12 -
9. Costs and Expenses
9.1 General, selling and administrative expenses consist of:
Three-Month Period Ended
2013
2014
(Unaudited and In Thousand Pesos)
Staff costs
Professional and other contracted services
Selling, advertising and promotions
Utilities, supplies and other administrative expenses
Repairs and maintenance
Rent
Courier, delivery and miscellaneous expenses
Taxes and licenses
Insurance and security services
Others
P
=1,950,086
1,756,156
1,731,142
1,144,650
1,089,295
915,942
408,912
407,603
347,038
130,150
P
=9,880,974
=1,666,028
P
1,102,517
1,296,996
1,001,275
966,281
839,856
466,441
589,688
335,331
141,963
=8,406,376
P
The “Others” account includes various items that are individually immaterial.
9.2 Impairment losses and others consist of:
Note
Impairment loss on:
Receivables
Property and equipment
Provisions for:
Inventory obsolescence and
market decline
Other probable losses
3
Three-Month Period Ended
2013
2014
(Unaudited and In Thousand Pesos)
P
=660,231
43,530
=355,990
P
9,373
93,486
36,436
P
=833,683
26,566
104,242
=496,171
P
9.3 Financing costs consist of:
Three-Month Period Ended
2013
2014
(Unaudited and In Thousand Pesos)
Interest expense*
Foreign exchange loss - net
Swap and other financing costs - net
Loss on derivative instruments
P
=488,007
73,316
67,400
–
P
=628,723
*This account is net of capitalized expense and inclusive of amortization of debt issuance costs.
=506,775
P
49,192
65,487
67,960
=689,414
P
- 13 -
Interest expense is incurred on the following:
Three-Month Period Ended
2013
2014
(Unaudited and In Thousand Pesos)
Long-term debt
Accretion expense
Amortization of debt issuance cost
Pension cost
Others
P
=399,002
44,871
26,908
17,226
–
P
=488,007
=425,075
P
44,666
23,230
10,742
3,062
=506,775
P
10. Contingencies
The Globe Group is contingently liable for various claims arising in the ordinary conduct of
business and certain tax assessments which are either pending decision by the courts or are
being contested, the outcome of which are not presently determinable. In the opinion of
management and legal counsel, the possibility of outflow of economic resources to settle the
contingent liability is remote.
11. Agreements and Commitments
Agreements and commitments with suppliers
The Globe Group engaged the services of various suppliers for the upgrade of its wireless, data
and telephony network. In partnership with an equipment and service provider and the
appointment of a project and program manager, Globe Group is undertaking a transformation
upgrade and overhaul of its business support systems, engaging a solution partner for this
USD790.00 million modernization project.
Deed of Assignment of Certificate of Public Convenience and Necessity by Wordwide
Communication Inc. (WWCI)
On July 5, 2013, the NTC approved the “Deed of Assignment” (DoA) dated February 13, 2013
executed by WWCI in favor of Globe Telecom. Through the DoA, WWCI assigned and
transferred its entire interest including the operation of its Trunk Radio Network, the
Certificate of Public Convenience and Necessity granted by the NTC and the pertinent permits
necessary to operate the trunk radio to Globe Telecom. The total consideration under the said
original DoA was =
P30.00 million.
On April 1, 2014, Globe Telecom and WWCI signed the Supplemental Agreement to the DoA
for final consideration of P
=150.00 million to be paid in tranches upon fulfillment of stated
conditions.
Conditions include reassignment and reallocation of Radio Station Licenses and issuance of
associated Frequency Assignment Sheets in the name of Globe. Pending compliance on the
conditions, payments will be recorded as advances classified under ‘Prepayments and other
current assets’ in the statements of financial position.
- 14 -
12. Earnings Per Share
Globe Group’s earnings per share amounts were computed as follows:
Three-Month Period Ended
2013
2014
(Unaudited and In Thousand Pesos
and Number of Shares, Except
Per Share Figures)
Net income attributable to common shareholders
for basic earnings per share (a)
Add dividends on preferred shares
Net income attributable to common shareholders
for diluted earnings per share (b)
Common shares outstanding, beginning
Add exercised stock options
Weighted average number of shares for basic
earnings per share (c)
Dilutive shares arising from:
Convertible preferred shares
Stock options
Adjusted weighted average number of common
shares for diluted earnings per share (d)
Basic earnings per share (a/c)
Diluted earnings per share (b/d)
P
=2,939,132
9,860
P
=646,706
9,336
P
=2,948,992
P
=656,042
132,596
80
132,406
11
132,676
132,417
469
139
700
116
133,284
P
=22.15
P
=22.13
133,233
=4.88
P
=4.88
P
13. Capital and Risk Management and Financial Instruments
13.1 General
The Globe Group adopts an expanded corporate governance approach in managing its
business risks. An Enterprise Risk Management Policy was developed to systematically
view the risks and to provide a better understanding of the different risks that could
threaten the achievement of the Globe Group’s mission, vision, strategies, and goals, and
to provide emphasis on how management and employees play a vital role in achieving
the Globe Group’s mission of transforming and enriching lives through communications.
The policies are not intended to eliminate risk but to manage it in such a way that
opportunities to create value for the stakeholders are achieved. Globe Group risk
management takes place in the context of the normal business processes such as strategic
planning, business planning, operational and support processes.
The application of these policies is the responsibility of the BOD through the Chief
Executive Officer. The Chief Financial Officer and concurrent Chief Risk Officer
champions and oversees the entire risk management function. Risk owners have been
identified for each risk and they are responsible for coordinating and continuously
improving risk strategies, processes and measures on an enterprise-wide basis in
accordance with established business objectives.
The risks are managed through the delegation of management and financial authority and
individual accountability as documented in employment contracts, consultancy contracts,
- 15 -
letters of authority, letters of appointment, performance planning and evaluation forms,
key result areas, terms of reference and other policies that provide guidelines for
managing specific risks arising from the Globe Group’s business operations and
environment.
The Globe Group continues to monitor and manage its financial risk exposures according
to its BOD approved policies.
13.2 Categories of Financial Assets and Financial Liabilities
The table below presents the carrying value of Globe Group’s financial instruments by
category (in thousand pesos):
March 31
Financial assets:
Financial assets at FVPL:
Derivative assets designated as cash flow hedges
Derivative assets not designated as hedges
AFS investments in equity securities - net
Loans and receivables - net*
Financial liabilities:
Financial liabilities at FVPL:
Derivative liabilities designated as cash flow hedges
Derivative liabilities not designated as hedges
Financial liabilities at amortized cost**
December 31
2013
(Audited)
2014
(Unaudited)
2013
(Unaudited)
P
=671,357
17,149
260,977
25,754,588
P
=26,704,071
P
=3,973
2,451
146,496
28,920,306
P
=29,073,226
P
=553,562
1,834
222,712
29,166,805
P
=29,944,913
P
=75,960
92,643
107,967,986
P
=108,136,589
P
=28,892
236,787
93,366,505
P
=93,632,184
P
=65,658
154,036
107,027,805
P
=107,247,499
* This consists of cash and cash equivalents, and long-term investments, receivables, other nontrade receivables and loans
receivables.
**This consists of accounts payable, accrued expenses, accrued project cost, traffic settlement-net, dividends payable, notes
payable, long-term debt (including current portion) and other long-term liabilities (including current portion).
As of March 31, 2014 and 2013, and December 31, 2013, the Globe Group has no
investments in foreign securities.
13.3 Fair Values of Financial Assets and Financial Liabilities
The table below presents a comparison of the carrying amounts and estimated fair values
of all the Globe Group’s financial instruments as of:
December 31
March 31
2013
2013
2014
(Unaudited)
(Audited)
(Unaudited)
Fair Value Carrying Value
Fair Value
Carrying Value
Fair Value Carrying Value
(In Thousand Pesos)
Financial assets:
Derivative assets
AFS investment in equity
securities
Financial liabilities:
Derivative liabilities (including
current portion)
Long-term debt (including
current portion)
P
= 688,506
P
= 688,506
P
=6,424
P
=6,424
P
=555,396
P
=555,396
260,977
P
= 949,483
260,977
P
= 949,483
146,496
P
=152,920
146,496
P
=152,920
222,712
P
=778,108
222,712
P
=778,108
P
= 168,603
P
= 168,603
P
=265,679
P
=265,679
P
=219,694
P
=219,694
67,644,033
P
= 67,812,636
69,145,748
P
= 69,314,351
62,377,964
P
=62,643,643
65,903,744
P
=66,169,423
64,081,049
P
=64,300,743
62,469,723
P
=62,689,417
- 16 -
The following methods and assumptions were used to estimate the fair values:
For variable rate financial instruments that reprice every three months, the carrying
value approximates the fair value because of recent and regular repricing based on
current market rates. For variable rate financial instruments that reprice every six
months, the fair value is determined by discounting the principal amount plus the next
interest payment using the prevailing market rate for the period up to the next repricing
date. The discount rates used range from 0.09% - 2.09% (for USD floating loans) and
1.02% - 1.23% (for Php floating loans). For noninterest bearing obligations, the fair
value is estimated as the present value of all future cash flows discounted using the
prevailing market rate of interest for a similar instrument.
The fair value of freestanding and embedded forward exchange contracts is calculated
by using the interest rate parity concept.
The fair values of interest rate swaps and cross currency swap transactions are
determined using valuation techniques with inputs and assumptions that are based on
market observable data and conditions and reflect appropriate risk adjustments that
market participants would make for credit and liquidity risks existing at the end each of
reporting period. The fair value of interest rate swap transactions is the net present value
of the estimated future cash flows. The fair values of currency and cross currency swap
transactions are determined based on changes in the term structure of interest rates of
each currency and the spot rate.
The fair values were tested to determine the impact of credit valuation adjustments.
However, the impact is immaterial given that the Globe Group deals its derivatives with
large foreign and local banks with minimal risk of default.
13.4 Fair Value Hierarchy
The following tables provide the fair value measurement hierarchy of the Globe Group’s
assets and liabilities:
March 31, 2014
Fair value measurement using
Quoted
prices in
active
markets
(Level 1)
Assets measured at fair value:
Derivative assets
Cross currency swaps
Embedded currency forwards
Nondeliverable forward
Deliverable forward
AFS investment in equity securities
Liabilities measured at fair value:
Derivative liabilities
Interest rate swaps
Cross currency swaps
Embedded currency forwards
Liabilities for which fair values are
disclosed:
Long-term debt (including current portion)
P
=–
–
Significant
Significant
observable unobservable
inputs
inputs
(Level 2)
(Level 3)
(Unaudited and In Thousand Pesos)
Total
P
=669,950
13,173
3,976
1,407
–
P
=–
–
–
–
88,402
75,155
5,046
–
–
88,402
75,155
5,046
–
69,145,748
–
69,145,748
260,977
–
P
=669,950
13,173
3,976
1,407
260,977
- 17 -
March 31, 2013
Fair value measurement using
Quoted
prices in
active
markets
(Level 1)
Assets measured at fair value:
Derivative assets
Cross currency swaps
Embedded currency forwards
Deliverable forward
Nondeliverable forward
AFS investment in equity securities
Liabilities measured at fair value:
Derivative liabilities
Interest rate swaps
Embedded currency forwards
Deliverable forwards
Liabilities for which fair values are
disclosed:
Long-term debt (including current portion)
Significant
Significant
observable
unobservable
inputs
inputs
(Level 2)
(Level 3)
(Unaudited and In Thousand Pesos)
Total
=
P–
–
–
P
=3,973
521
1,930
=
P–
–
–
P
=3,973
521
1,930
146,496
–
–
146,496
–
–
–
240,991
19,843
4,845
–
–
–
240,991
19,843
4,845
65,903,744
65,903,744
December 31, 2013
Fair value measurement using
Quoted
prices in
active
markets
(Level 1)
Assets measured at fair value:
Derivative assets
Cross currency swaps
Embedded currency forwards
AFS investment in equity securities
Liabilities measured at fair value:
Derivative liabilities
Interest rate swaps
Cross currency swaps
Embedded currency forwards
Liabilities for which fair values are
disclosed:
Long-term debt (including current portion)
Significant
Significant
observable
unobservable
inputs
inputs
(Level 2)
(Level 3)
(Audited and In Thousand Pesos)
Total
=
P–
–
222,712
P
=553,562
1,834
–
=
P–
–
–
P
=553,562
1,834
222,712
–
–
–
151,493
62,174
6,027
–
–
–
151,493
62,174
6,027
–
68,046,189
–
68,046,189
There were no transfers from Level 1 and Level 2 fair value measurements as of
March 31, 2014 and 2013, and December 31, 2013. The Globe Group has no financial
instruments classified under Level 3.
14. Operating Segment Information
The Globe Group’s reportable segments consist of: (1) mobile communications services;
(2) wireline communication services; and (3) others, which the Globe Group operates and
manages as strategic business units and organize by products and services. The Globe Group
presents its various operating segments based on segment net income.
- 18 -
Intersegment transfers or transactions are entered into under the normal commercial terms and
conditions that would also be available to unrelated third parties. Segment revenue, segment
expense and segment result include transfers between business segments. Those transfers are
eliminated in consolidation.
Most of revenues are derived from operations within the Philippines, hence, the Globe Group
does not present geographical information required by PFRS 8, Operating Segments. The
Globe Group does not have a single customer that will meet the 10% reporting criteria.
The Globe Group also presents the different product types that are included in the report that is
regularly reviewed by the chief operating decision maker in assessing the operating segments’
performance.
Segment assets and liabilities are not measures used by the chief operating decision maker
since the assets and liabilities are managed on a group basis.
The Globe Group’s segment information are as follows:
March 31, 2014
Mobile
Wireline
Communications Communications
Services
Services
Others
(Unaudited and In Thousands Pesos)
REVENUES:
Service revenues
External customers:
Voice
Data
Broadband
Nonservice revenues:
External customers
Segment revenues
EBITDA
Depreciation and amortization
EBIT
NET INCOME (LOSS) BEFORE TAX2
Provision for income tax2
NET INCOME (LOSS)
Core NIAT
Other segment information
Intersegment revenues
Subsidy1
Interest income2
Interest expense
Equity in net losses of joint ventures
Impairment losses and others
Capital expenditure
Cost of sales
Operating expenses
Consolidated
P
=8,673,224
9,728,727
P
=664,889
1,318,967
2,783,062
P
=–
61,269
P
=9,338,113
11,108,963
2,783,062
815,256
19,217,207
8,037,689
(2,039,471)
5,998,218
253,504
5,020,422
867,900
(2,014,042)
(1,146,142)
61,231
122,500
(109,836)
(13,966)
(123,802)
1,129,991
24,360,129
8,795,753
(4,067,479)
4,728,274
5,683,854
(1,020,443)
P
=4,663,411
P
=–
(1,263,757)
(298,516)
(P
= 1,562,273)
P
=–
(124,341)
(27,805)
(P
= 152,146)
P
=–
4,295,756
(1,346,764)
P
=2,948,992
P
=3,357,262
(P
= 322,827)
(1,643,000)
150,895
(464,292)
(26,936)
(626,555)
(5,875,933)
(2,458,256)
(6,795,322)
(P
= 265,280)
(98,216)
11,254
(23,527)
–
(207,715)
–
(351,719)
(3,674,120)
(P
= 588,107)
3,729
142
(188)
–
587
–
(57,503)
(174,272)
(P
= 1,176,214)
(1,737,487)
162,291
(488,007)
(26,936)
(833,683)
(5,875,933)
(2,867,478)
(10,643,714)
- 19 -
Mobile
Wireline
Communications Communications
Services
Services
Others
(Unaudited and In Thousands Pesos)
Cash Flows
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
1
2
P
=7,942,577
(3,004,625)
(5,325,838)
P
=541,344
(1,242,584)
–
P
=541,344
(41,030)
102,496
Consolidated
P
=8,546,078
(4,288,239)
(5,223,342)
Computed as non-service revenues less cost of sales
Net of final tax
March 31, 2013
Mobile
Wireline
Communications Communications
Services
Services
Others
(Unaudited and In Thousand Pesos)
REVENUES:
Service revenues
External customers:
Voice
Data
Broadband
Nonservice revenues:
External customers
Segment revenues
EBITDA
Depreciation and amortization
EBIT
Consolidated
P
=7,659,812
9,433,858
–
P
=647,510
1,111,068
2,485,854
=
P–
30,403
–
P
=8,307,322
10,575,329
2,485,854
929,334
18,023,004
7,670,790
(4,765,615)
2,905,175
172,552
4,416,984
1,171,187
(2,637,711)
(1,466,524)
302
30,705
(65,883)
(3,519)
(69,402)
1,102,188
22,470,693
8,776,094
(7,406,845)
1,369,249
NET INCOME (LOSS) BEFORE TAX2
Provision for income tax2
NET INCOME (LOSS)
Core NIAT
Other segment information
Intersegment revenues
Subsidy1
Interest income2
Interest expense
Equity in net income of joint ventures
Impairment losses and others
Capital expenditures
Cost of sales
Operating expenses
2,419,520
(165,935)
P
=2,253,585
=
P–
(1,491,817)
(13,946)
(P
=1,505,763)
=
P–
(69,333)
(22,447)
(P
=91,780)
=
P–
858,370
(202,328)
P
=656,042
P
=3,085,600
(P
=38,967)
(1,568,289)
151,666
(482,086)
10,794
(322,266)
7,175,679
(2,497,623)
7,854,588
(P
=101,677)
(37,250)
20,647
(24,689)
–
(173,905)
713,891
(209,802)
3,035,995
(P
=233,053)
302
145
–
–
–
1,776
–
96,588
(P
=373,697)
(1,605,237)
172,458
(506,775)
10,794
(496,171)
7,891,346
(2,707,425)
10,987,171
Cash Flows
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
7,528,421
(5,853,958)
(556,624)
1,620,484
(781,144)
(2,000,000)
4,055
(1,712)
(24,998)
9,152,960
(6,636,814)
(2,581,622)
1
2
Computed as non-service revenues less cost of sales
Net of final tax
- 20 -
The reconciliation of the EBITDA to income before income tax presented in the consolidated
statements of comprehensive income is shown below:
March 31
2013
2014
(Unaudited and In Thousand Pesos )
EBITDA
Depreciation and amortization
Financing costs
Equity in net income (losses) of joint ventures
Interest income
Gains on disposals of property and equipment - net
Other items
Income before income tax
P
=8,795,753
(4,067,479)
(628,723)
(26,936)
163,705
24,981
44,640
P
=4,305,941
P
=8,776,094
(7,406,845)
(689,414)
10,794
179,990
12,340
(17,057)
=865,902
P
The reconciliation of core NIAT to NIAT is shown below:
March 31
2013
2014
(Unaudited and In Thousand Pesos )
Core NIAT
Mark-to-market gains (losses)
Foreign exchange losses (gains)
Non-recurring items
NIAT
P
=3,357,262
42,864
(51,321)
(399,813)
P
=2,948,992
P
=3,085,600
(51,940)
(37,596)
(2,340,022)
P
=656,042
14.1 Mobile Communications Services
This reporting segment is made up of digital cellular telecommunications services that
allow subscribers to make and receive local, domestic long distance and international
long distance calls, international roaming calls and other value added services in any
place within the coverage areas.
14.1.1 Mobile communication voice net service revenues include the following:
a) Monthly service fees on postpaid plans;
b) Charges for intra-network and outbound calls in excess of the consumable
minutes for various Globe Postpaid plans, including currency exchange rate
adjustments (CERA) net of loyalty discounts credited to subscriber billings;
c) Airtime fees for intra network and outbound calls recognized upon the earlier
of actual usage of the airtime value or expiration of the unused value of the
prepaid reload denomination (for Globe Prepaid and TM) which occurs
between 1 and 60 days after activation depending on the prepaid value
reloaded by the subscriber net of (i) bonus credits and (ii) prepaid reload
discounts; and
d) Revenues generated from inbound international and national long distance
calls and international roaming calls.
14.1.2 Mobile communication data net service revenues consist of revenues from
value-added services such as inbound and outbound SMS and MMS, content
downloading, browsing and infotext, subscription fees on unlimited and bucket
- 21 -
prepaid SMS services net of any settlement payouts to international and local
carriers and content providers.
14.1.3 Globe Telecom offers its wireless communications services to consumers,
corporate and SME clients through the following three (3) brands: Globe
Postpaid, Globe Prepaid and Touch Mobile.
The Globe Group also provides its subscribers with mobile payment and
remittance services under the GCash brand.
14.2 Wireline Communications Services
This reporting segment is made up of fixed line telecommunications services which offer
subscribers local, domestic long distance and international long distance voice services in
addition to broadband and mobile internet services and a number of VAS in various areas
covered by the Certificate of Public Convenience and Necessity (CPCN) granted by the
NTC.
14.2.1 Wireline voice net service revenues consist of the following:
a) Monthly service fees including CERA of voice-only subscriptions;
b) Revenues from local, international and national long distance calls made by
postpaid, prepaid wireline subscribers, as well as broadband customers who
have subscribed to data packages bundled with a voice service. Revenues are
net of prepaid call card discounts;
c) Revenues from inbound local, international and national long distance calls
from other carriers terminating on our network;
d) Revenues from additional landline features such as caller ID, call waiting, call
forwarding, multi-calling, voice mail, duplex and hotline numbers and other
value-added features; and
e) Installation charges and other one-time fees associated with the establishment
of the service.
14.2.2 Wireline data net service revenues consist of the following:
a)
b)
c)
d)
Monthly service fees from international and domestic leased lines.
Other wholesale transport services;
Revenues from value-added services; and
One-time connection charges associated with the establishment of service.
14.2.3 Broadband service revenues consist of the following:
a) Monthly service fees on mobile and fixed wireless and wired broadband plans
and charges for usage in excess of plan minutes; and
b) Prepaid usage charges consumed by mobile broadband subscribers.
14.2.4 The Globe Group provides wireline voice communications (local, national and
international long distance), data and broadband and data services to consumers,
corporate and SME clients in the Philippines.
· Consumers - the Globe Group’s postpaid voice service provides basic
landline services including toll-free NDD calls to other Globe landline
subscribers for a fixed monthly fee. For wired broadband, consumers can
choose between broadband services bundled with a voice line, or a broadband
data-only service. For fixed wireless broadband connection using Long-Term
- 22 -
Evolution (LTE) or Worldwide Interoperability for Microwave Access
(WiMax), the Globe Group offers broadband packages bundled with voice, or
broadband data-only service. For subscribers who require full mobility,
Globe Broadband Tattoo service come in postpaid and prepaid packages and
allow them to access the internet via LTE, 3G with HSDPA, Enhanced
Datarate for GSM Evolution (EDGE), General Packet Radio Service (GPRS)
or WiFi at hotspots located nationwide.
· Corporate/SME clients - for corporate and SME enterprise clients wireline
voice communication needs, the Globe Group offers postpaid service bundles
which come with a business landline and unlimited dial-up internet access.
The Globe Group also provides a full suite of telephony services from basic
direct lines to Integrated Services Digital Network (ISDN) services, 1-800
numbers, International Direct Dialing (IDD) and National Direct Dialing
(NDD) access as well as managed voice solutions such as Voice Over Internet
Protocol (VOIP) and managed Internet Protocol (IP) communications. Valuepriced, high speed data services, wholesale and corporate internet access, data
center services and segment-specific solutions customized to the needs of
vertical industries.
14.3
Others
This reporting segment represents mobile value added data content and application
development services. Revenues principally consist of revenue share with various
carriers on content downloaded by their subscribers and contracted fees for other
application development services provided to various partners.
15. Note to Condensed Consolidated Statements of Cash Flows
The principal noncash transactions are as follows (in thousands pesos):
March 31
2013
2014
(Unaudited)
(Unaudited)
Increase in liabilities related to
the acquisition of property and equipment
Accretion of interest income from loan receivable
Capitalized ARO
P
=941,810
125,249
–
P
=780,642
114,357
786
16. Events after the Reporting Period
1. On April 8, 2014, further to the approval of the BOD dated February 10, 2014 on the
amendment of Articles of Incorporation to reclassify unissued common and voting
preferred shares into non-voting preferred shares, the stockholders approved the issuance,
offer and listing of up to 20 million non-voting preferred shares, with an issue volume of
P
=10.00 billion. The non-voting preferred shares shall be redeemable, non-convertible,
cumulative and may be issued in series.
2. On May 7, 2014, NTC denied the Motion for Reconsideration filed by Globe last
December 5, 2012 in relation to the November 20, 2012 Decision of the Commission
- 23 -
ordering Globe to comply with certain directives pursuant to Memorandum Circular
No. 02-10-2011 (Interconnection Charge for Short Messaging Service).
Globe’s assessment is that the Company is compliant with the NTC’s Memorandum
Circular No. 02-10-2011, and therefore will elevate the case to The Court of Appeals.
If, however, Globe would be held as not being in compliance with the circular, Globe may
be contingently liable to refund to any complaining subscribers any charges it may have
collected in excess of what it could have charged under the NTC’s disputed Decision.
Management has no estimate of the contingent liability at this time.