Robust economic growth to support Globe Telecom mobile business

The country’s robust economic growth is expected to further boost Globe Telecom’s mobile revenue growth this year on expectations of stronger domestic spending.

“The Philippines has been enjoying assertive GDP growth and it is driving a lot of confidence in the economy. Domestic spending remains resilient, which somehow insulates the country from the economic challenges and uncertainties from the external environment. This bodes well for our business.” said Globe President & CEO Ernest Cu, referring to the country’s economic growth of 7.8% in the first quarter of the year.

The country’s economic growth in the three months of the year is at its fastest pace in nearly three years, outperforming bigger economies in Asia and well above the government’s growth target of 6.%-7% for the year.

In the same period, growth in Globe mobile business has been underpinned mainly by a 13% year-on-year growth in its mobile subscribers, to hit a fresh record high of 35.1 million at the end of the first quarter.

Given current trends, the company’s postpaid segment will continue to drive revenue growth, Cu emphasized.  He noted that current trend shows that many consumers are shifting from prepaid to postpaid mobile service and there is also a growing inclination towards the use of smartphones.

“We are experiencing a resurgence in the postpaid mobile market as we’ve been seeing a lot of migration from prepaid to postpaid,” Cu said, noting the company’s mobile business posted a3% increase in revenue growth in the first quarter amid challenging and competitive environment.

In 2012, the company booked a total PHP22.85 billion in postpaid revenue, pushing total mobile revenues to PHP67.19 billion, a 6% growth from a year earlier.

“Over the short term, mobile revenue growth can be sustained primarily by momentum in postpaid,” said Cu, noting the company’s impressive 24% growth in postpaid revenue last year.

Growth trajectory in the postpaid segment will likely continue moving forward following improving quality of acquired postpaid subscribers last year. About 42% of regular postpaid net additions signed up for plans with monthly service fees of P999 and above, compared to just 19% in 2011, Cu said.

Company efforts to reinvest a portion of its postpaid revenues in a bid to support additional subscriber acquisitions could further support revenue generation from postpaid. “While subscriber acquisition costs are recognized upfront, full benefits are realized overtime,” he said, adding handset subsidies are recovered well within the usual 24-month lock up period.

According to Cu, revenue growth is also expected to be driven by increasing use of mobile internet and broadband.

Last year, mobile browsing generated revenues of over PHP3.1 billion in 2012, a 55% surge when compared to PHP2.0 billion in 2011 attributed to increased smartphone penetration and the company's continued launch of affordable mobile data plans.

Broadband revenues, on the other hand, revenues from its broadband business improved 16% to PHP8.721 billion in 2012, compared with PHP7.496 billion in the year-earlier.