GT - Globe Telecom

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(Business Address: No. Street City / Town / Province)
ALBERTO M. DE LARRAZABAL
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Month
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Annual Meeting
Foreign
GLOBE TELECOM, INC.
5th Floor Globe Telecom Plaza
Pioneer corner Madison Streets
Mandaluyong City 1552
(632) 730-2000
SEC Form 17-A
FOR THE FISCAL YEAR ENDED
31 DECEMBER 2010
SEC Form 17A 2010
2
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17 OF THE REVISED SECURITIES ACT
AND SECTION 141 OF CORPORATION CODE OF THE PHILIPPINES
1. For the fiscal year ended: 31 December 2010
2. SEC Identification Number: 1177
3. BIR Tax Identification No. 000-768-480
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 principal office: 5th Floor, Globe Telecom Plaza, Pioneer corner Madison
Streets, Mandaluyong City
Postal Code: 1552
8. Registrant's telephone number: (632) 730-2000
9. Former name, former address, and former fiscal year: Not Applicable
10. Securities registered pursuant to Sections 4 and 8 of the RSA
Title of Each Class
Common Stock (P50.00 par value)
Preferred Stock ( P5.00 par value)
Number of Shares Outstanding
132,348,473
158,515,021
11. Are any or all of these securities listed on the Philippine Stock Exchange? Yes [ x ] No [ ]
12. Check whether the registrant:
(a) has filed all reports required to be filed by Section 11 of the Revised Securities Act (RSA)
and RSA 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 that the
registrant was required to file such reports):
Yes [ x ]
No [ ]
(b) has been subject to such filing requirements for the past 90 days:
Yes [ x ]
No [ ]
13. Aggregate market value of the voting stock held by non-affiliates of the registrant as of 31
December 2010: P23.4 billion
SEC Form 17A 2010
3
TABLE OF CONTENTS
PART I – BUSINESS AND GENERAL INFORMATION ...........................................................5
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
BUSINESS ....................................................................................................................5
PROPERTIES ..............................................................................................................28
LEGAL PROCEEDINGS .................................................................................................30
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......................................31
PART II – OPERATIONAL AND FINANCIAL INFORMATION ..............................................32
ITEM 5. ISSUER’S EQUITY, MARKET PRICE, DIVIDENDS AND RELATED STOCKHOLDER MATTERS .32
ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS ......................................37
For The Financial Year Ended 2010.................................................................................37
For The Financial Year Ended 2009.................................................................................69
ITEM 7. FINANCIAL STATEMENTS .............................................................................................99
PART III- CONTROL AND COMPENSATION INFORMATION ...........................................100
ITEM 8. DIRECTORS AND KEY OFFICERS ................................................................................100
ITEM 9. EXECUTIVE COMPENSATION......................................................................................108
ITEM 10. SECURITY OWNERSHIP OF CERTAIN RECORD, BENEFICIAL OWNERS & MANAGEMENT
............................................................................................................................................115
ITEM 11. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ..........................................116
PART IV – CORPORATE GOVERNANCE ...........................................................................117
SIGNATURES........................................................................................................................133
PART V – EXHIBITS AND SCHEDULES .............................................................................134
INDEX TO EXHIBITS.............................................................................................................135
SEC Form 17A 2010
4
PART I – BUSINESS AND GENERAL INFORMATION
Any reference in this report to “we”, “us”, “our”, “Company” means the Globe Group including its
wholly-owned subsidiaries and references to “Globe” mean Globe Telecom, Inc., the parent
company, not including its wholly-owned subsidiaries. Also, unless otherwise stated or the context
indicates otherwise, references to Board of Directors, committees, management, directors,
officers and stockholders are references to the Board of Directors, committees, management,
directors, officers and stockholders of Globe and references to the Bylaws, Articles of
Incorporation or other documents are references to the Bylaws, Articles of Incorporation or other
documents of Globe.
Item 1. Business
Globe Telecom, Inc. is a major provider of telecommunications services in the Philippines,
supported by over 5,600 employees and over 750,000 retailers, distributors, suppliers, and
business partners nationwide.
The Company operates one of the largest and most
technologically-advanced 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 over 26 million mobile
subscribers, over 1,000,000 broadband customers, and over 600,000 landline subscribers.
Globe is also 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$2.4 billion as of the end of 2010.
The Company’s principal shareholders are Ayala Corporation and Singapore Telecom, both
industry leaders in the country and in the region. 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
micro-entrepreneurs 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 protocol-based
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. and EGGstreme (Hong Kong) Limited (EHL)
(collectively referred here as EGG Group), provide digital media content and
applications; and
•
GTI Business Holdings, Inc. (GTI), a wholly-owned subsidiary, is an investment
company with authority to provide VOIP services and other Value Added Services.
SEC Form 17A 2010
5
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.
A. Business Development and Corporate History
In 1928, Congress passed Act No. 3495 granting the Robert Dollar Company, a corporation
organized and existing under the laws of the State of California, a franchise to operate wireless
long distance message services in the Philippines. Subsequently, Congress passed Act No.
4150 in 1934 to transfer the franchise and privileges of the Robert Dollar Company to Globe
Wireless Limited which was incorporated in the Philippines on 15 January 1935.
Globe Wireless Limited was later renamed as Globe-Mackay Cable and Radio Corporation
(“Globe-Mackay”). Through Republic Act (“RA”) 4630 enacted in 1965 by Congress, its franchise
was further expanded to allow it to operate international communications systems. GlobeMackay was granted a new franchise in 1980 by Batasan Pambansa under Batas Pambansa 95.
In 1974, Globe-Mackay sold 60% of its stock to Ayala Corporation, local investors and its
employees. It offered its shares to the public on 11 August 1975.
In 1992, Globe-Mackay merged with Clavecilla Radio Corporation, a domestic
telecommunications pioneer, to form GMCR, Inc. (“GMCR”). The merger gave GMCR the
capability to provide all forms of telecommunications to address the international and domestic
requirements of its customers. GMCR was subsequently renamed Globe Telecom, Inc. (“Globe”).
In 1993, Globe welcomed a new foreign partner, Singapore Telecom, Inc. (STI), a wholly-owned
subsidiary of Singapore Telecommunications Limited (“SingTel”), after Ayala and STI signed a
Memorandum of Understanding.
In 2001, Globe acquired Isla Communications Company, Inc. (“Islacom”) which became its
wholly-owned subsidiary effective 27 June 2001. In 2003, the National Telecommunications
Commission (“NTC”) granted Globe’s application to transfer its fixed line business assets and
subscribers to Islacom, pursuant to its strategy to integrate all of its fixed line services under
Islacom. Subsequently, Islacom was renamed as Innove Communications, Inc. (“Innove”).
In 2004, Globe invested in G-Xchange, Inc. (“GXI”), a wholly-owned subsidiary, to handle the
mobile payment and remittance service marketed under the GCash brand using Globe’s network
as transport channel. GXI started commercial operations on 16 October 2004.
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.
In 2005, Innove was awarded by the NTC with a nationwide franchise for its fixed line business,
allowing it to operate a Local Exchange Carrier service nationwide and expand its network
coverage. In December 2005, the NTC approved Globe’s application for third generation (3G)
radio frequency spectra to support the upgrade of its cellular mobile telephone system (“CMTS”)
network to be able to provide 3G services. The Company was assigned with 10-Megahertz (MHz)
of the 3G radio frequency spectrum.
SEC Form 17A 2010
6
On 19 May 2008, following the approval of the NTC, the subscriber contracts of Touch Mobile or
TM prepaid service were transferred from Innove to Globe which now operates all wireless
prepaid services using its integrated cellular networks.
In August 2008, and to further grow its mobile data segment, Globe acquired 100% ownership of
Entertainment Gateway Group (“EGG”), a leading mobile content provider in the Philippines.
EGG offers a wide array of value-added services covering music, news and information, games,
chat and web-to-mobile messaging.
On 25 November 2008, Globe formed GTI Business Holdings, Inc. (GTIBH) primarily to act as an
investment company.
On October 30, 2008, Globe, the Bank of the Philippine Islands (BPI) and Ayala Corporation (AC)
signed a memorandum of agreement to form a joint venture that would allow rural and lowincome customers’ access to financial products and services. Last October 2009, the Bangko
Sentral ng Pilipinas (BSP) approved the sale and transfer by BPI of its shares of stock in Pilipinas
Savings Bank, Inc. (PSBI), formalizing the creation of the venture. Globe’s and BPI’s ownership
stakes in PSBI is at 40% each, while AC’s shareholding is at 20%. The partners plan to transform
PSBI (now called BPI Globe BanKO, Inc.) into the country’s first mobile microfinance bank. The
bank’s initial focus will be on wholesale lending to other microfinance institutions but will
eventually expand to include retail lending, deposit-taking, and micro-insurance. In the first
quarter of 2010, BPI Globe Banko opened its first branch in Metro Manila and inaugurated 5 more
branches across the country in the first quarter of 2011.
There was no bankruptcy, receivership or similar proceedings initiated during the past three
years.
SEC Form 17A 2010
7
B. Business Segments
1. 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, consumable G-Flex Plans,
Load Allowance Plans, Load Tipid, Apple TM iPhone 3G plans and high-end Platinum Plans.
During the year, the Company further expanded its postpaid offerings to include MY
SUPERPLAN and MY FULLY LOADED PLAN, as well as various other add-on roaming and
mobile browsing plans to cater to the needs of specific market segments. MY FULLY LOADED
PLAN allows subscribers to customize their plan depending on their needs. Meanwhile, MY
SUPERPLAN is an affordable and first-in-the-market personalized plan which allows subscribers
to choose from and combine its unlimited call, text and web browsing services. Both MY
SUPERPLAN and MY FULLY LOADED PLAN give subscribers the flexibility to change their
bundled services as often as monthly. For those subscribers who want to upgrade their mobile
internet browsing experience, Globe introduced Personal Blackberry and Super Surf add-on plans
which entail additional monthly fees on top of their regular monthly postpaid subscription fees.
Globe Prepaid and TM are the prepaid brands of Globe. Globe Prepaid is targeted towards the
adult, mainstream market. Its unique brand proposition revolves around its innovative product and
service offerings, superior customer service, and Globe’s “worldwidest” services and global
network reach. TM, on the other hand, caters to the value-conscious segment of the market.
In addition to digital wireless communications, Globe also offers mobile payments and remittance
service under the GCash brand. GCash is an internationally acclaimed micro payment service
that transforms a mobile phone into a virtual wallet, enabling secure, fast, and convenient money
transfers at the speed and cost of a text message. Since the launch of GCash, wholly-owned
subsidiary GXI has established a wide network of local and international partners that includes
government agencies, utility companies, cooperatives, insurance companies, remittance
companies, universities, and commercial establishments which have agreed to accept GCash as
a means of payment for products and services.
Globe offers various top-up or reloading options and facilities for prepaid subscribers including
prepaid call and text cards, bank channels such as ATMs, credit cards, and through internet
banking. Subscribers can also top-up at over 750,000 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’s
AutoLoad Max and Share-A-Load services are also available in selected OFW hubs all over the
world.
During the year, the Company launched a loyalty and rewards program called My Rewards, My
Globe for Globe Prepaid subscribers and TM Astig Rewards for TM subscribers. Under the
program, and based on a defined scoring system, prepaid subscribers earn points based on
tenure and reload. Subscribers can use their points to redeem rewards including Globe and TM
products, travel mileage, and gift certificates from leading retail establishments. Globe Postpaid
subscribers outside the lock-up period can also earn points based on their monthly billed amounts
and length of stay with Globe. Rewards also include Globe products, as well as bill rebates,
gadgets, gift certificates, and travel mileage. 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 a 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.
SEC Form 17A 2010
8
(a) 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 pioneered international roaming in 1995 and now has one of the widest networks with
over 600 roaming partners in more than 200 calling destinations worldwide. Globe also offers
roaming coverage on-board selected shipping lines, airlines and via satellite. Through its
Globe Kababayan program, Globe also 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.
(b) Mobile Data and Value-Added Services
Globe’s data services include local and international SMS offerings, mobile browsing and
content downloads. Globe also offers various bucket and unlimited SMS packages to cater to
the different needs and lifestyles of its postpaid and prepaid subscribers. Additionally, Globe
subscribers can send and receive Multimedia Messaging Service (MMS) pictures and video,
or do local and international 3G video calling.
Globe’s mobile browsing services allow subscribers to access the internet using their internetcapable handsets or laptops with USB modems. Data access can be made using various
technologies including 3G with HSDPA, EDGE and GPRS. Browsing subscribers now have
multiple charging options with Globe’s Flexible Mobile Internet Browsing rates which allow
subscribers to choose between time or usage-based rates. They can also choose between
daily or monthly browsing plans.
The Company also 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, mobile chat and play games, among others.
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 GCashactivated SIM.
2. 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.
To better serve the various needs of its customers, Globe organized dedicated customer facing
units (CFUs) within the Company to focus on the integrated mobile and fixed line needs of
specific market segments. There are consumer 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 end-to-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.
SEC Form 17A 2010
9
(a) 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) and fixed lines
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.
(b) 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 data services,
wholesale and corporate internet access, data center services and segment-specific solutions
tailored to the needs of specific industries.
Globe’s international data services provide its corporate and enterprise customers with the
most diverse international connectivity solutions. Globe’s extensive data network allow
customers to manage their own virtual private networks (VPN), subscribe to wholesale
internet access via managed international private leased lines (IPL), 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
co-location requirements and dedicated hardware from leading partner vendors for off-site
deployment.
Other fixed line data services include access services that deliver premium-grade access
solutions combining voice, broadband and video offerings designed to address specific
connectivity requirements. These include Broadband Internet Zones (BIZ) for broadband-toroom internet access for hotels, and Internet Exchange (GiX) services for bandwidth-ondemand access packages based on average usage.
(c) 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. Wired or
DSL broadband packages bundled with voice, or broadband data-only services are available
at download speeds ranging from 256 kbps up to 3 mbps. In selected areas where DSL is
not yet available, Globe offers a fixed wireless broadband service using its WiMAX network.
Meanwhile, for consumers who require a fully mobile, internet-on-the-go broadband
connection, Globe Broadband Tattoo allows subscribers to access the internet at speeds of
up to 2 mbps using 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 Globe’s Hyper Speed broadband plans using leading edge
GPON (Gigabit Passive Optical Network) technology with speeds of up to 100 mbps.
SEC Form 17A 2010
10
C. Sales and Distribution
Globe has various sales and distribution channels to address the diverse needs of its subscribers.
1. Independent Dealers
Globe utilizes a number of independent dealers throughout the Philippines to sell and distribute its
prepaid wireless services. This includes major distributors of wireless phone handsets who
usually have their own retail networks, direct sales force, and sub-dealers Dealers are
compensated based on the type, volume and value of reload made in a given period. This takes
the form of fixed discounts for prepaid airtime cards and SIM packs, and discounted selling price
for phonekits.
Additionally, Globe also relies on its distribution network of over 750,000
AutoloadMax retailers nationwide who offer prepaid reloading services to Globe and TM
subscribers.
2. Globe Stores
The Company has a total of 134 Globe Stores in major cities across the country where customers
are able to inquire and subscribe to wireless, broadband and fixed line services, reload prepaid
credits, make GCash transactions, purchase handsets and accessories, request for handset
repairs, try out communications devices, and pay bills. The Globe Stores are also registered with
the Bangko Sentral ng Pilipinas (BSP) as remittance outlets.
Last June 2010, and in line with the Company’s thrust to become a more customer-focused and
service-driven organization, Globe opened its Greenbelt 4 store in Makati using a new design
concept. Departing from the traditional store concept which is transactional in nature, the new
redesigned Globe Store carries a seamless, semi-circular, two-section design layout which allows
anyone to easily browse around the product display as well as request for after sales support. It
also boasts of a wide array of mobile phones that the customers can feel, touch and test. In
addition, there are laptops with high speed internet broadband connections for everyone to try.
The Globe store has an Express Section for fast transactions such as modification of account
information and subscription plans; a Full-Service Section for more complex transactions and
opening of new accounts; and a Cashier Section for bill payments. The store also has a self-help
area where customers can, among others, print a copy of their bill, and use interactive touch
screens for easy access to information about the different mobile phones and Globe products and
services.
Later during the year, seven new and redesigned Globe Stores were also opened in Alabang
Town Center, SM City North EDSA, SM City Fairview, Ayala Center Cebu, SM City Southmall,
SM City Tarlac and Gaisano Grand Mall in Tagum City. Going forward, the Company will continue
to redesign more of its stores in strategic locations nationwide into the new concept Globe Stores.
3. Customer Facing Units
To better serve the various needs of its customers, Globe organized dedicated customer facing
units (CFUs) within the Company to focus on the integrated mobile and fixed line needs of
specific market segments. There is a Consumer CFU 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 end-to-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.
4. Others
Globe also distributes its prepaid products SIM packs, prepaid call cards and credits through
consumer distribution channels such as convenience stores, gas stations, drugstores and
bookstores. Lower denomination prepaid loads are also available in public utility vehicles, street
vendors, and selected restaurants nationwide via the Globe Tingi load, a scratch card in
affordable denominations.
SEC Form 17A 2010
11
D. Operating Revenues
Net Operating Revenues by Business
Segment
(in Php Mn)
Net Service Revenues
Mobile ……………………………………….
1
2010
Year Ended 31 December
% of
total
2009
%
2008
% of
total
50,503
77%
53,321
83%
55,436
86%
Voice 1……………………………………..
Data 2………………………………………
Fixed Line and Broadband……………….
25,971
24,532
12,052
40%
37%
18%
26,497
26,824
9,122
41%
42%
15%
26,971
28,465
7,458
42%
44%
11%
Fixed Line Voice 3………………………
Fixed Line Data 4…………………………
Broadband 5………………………………
Net Service Revenues………………………...
2,816
3,488
5,748
62,555
4%
5%
9%
95%
2,795
3,038
3,289
62,443
4%
5%
6%
98%
3,088
2,478
1,892
62,894
4%
4%
3%
97%
Non Service Revenues ……………………....
2,993
5%
1,418
2%
1,924
3%
Net Operating Revenues………………………
65,548
100%
63,861
100%
64,818
100%
Mobile voice service revenues include the following:
a) Prorated monthly service fees on consumable minutes of postpaid plans;
b) Subscription fees on unlimited and bucket voice promotions including the expiration of the unused value of
denomination loaded;
c) 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
d) 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.
Revenues from (a) and (d) are reduced by any interconnection or settlement payouts to international and local carriers
and content providers.
2
Mobile data net service revenues consist of revenues from value-added services such as inbound and outbound SMS
and MMS, mobile internet browsing and content downloading, 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.
Mobile data net service revenues consist of prorated monthly service fees on free text allocation of postpaid
plans, revenues from value-added services such as inbound and outbound SMS and MMS, content
downloading, mobile data browsing and infotext, international VAS and related services, subscription fees on
unlimited and bucket prepaid SMS and add-on VAS services, net of any interconnection or settlement payouts
to international and local carriers and content providers.
3
Fixed Line 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 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;
c) Revenues from inbound local, international and national long distance calls from other carriers terminating on
Globe’s 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;
e) Installation charges and other one-time fees associated with the establishment of the service; and
f) Revenues from DUO and SUPERDUO (fixed line portion) services consisting of monthly service fees for postpaid
and subscription fees for prepaid subscribers.
Revenues from (a) and (c) are net of any interconnection or settlement payments to domestic & international carriers.
4
Fixed Line data net service revenues consist of the following:
a)
b)
c)
d)
5
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.
Broadband net service revenues consist of the following:
SEC Form 17A 2010
12
a) Monthly service fees of wired, fixed wireless, and fully mobile broadband data only and bundled voice and data
subscriptions;
b) Browsing revenues from all postpaid and prepaid wired, fixed wireless and fully mobile broadband packages in
excess of allocated free browsing minutes and expiration of unused value of prepaid load credits;
c) Value-added services such as games; and
d) Installation charges and other one-time fees associated with the service.
Globe’s mobile business contributed P50.5 billion in 2010 accounting for 81% of total service
revenues, lower compared to the 85% level posted in 2009. Its mobile voice service revenues
amounted to P26.0 billion in 2010, accounting for 51% of total mobile service revenues compared
to 50% in 2009. On the other hand, mobile data business contributed P24.5 billion in 2010
compared to P26.8 billion in 2009.
Globe’s fixed line and broadband business delivered revenues of P12.1 billion in 2010,
accounting for the remaining 19% of total service revenues with increased contribution from
Broadband, which posted revenues of P5.7 billion in 2010 compared to P3.3 billion in 2009.
SEC Form 17A 2010
13
E. Competition
1. Industry, Competitors and Methods of Competition
(a) Mobile Market
The Philippine wireless market is a maturing market with a total industry SIM base of 84.6
million and wireless industry penetration rate of over 90% as of December 31, 2010.
Approximately 98% of industry subscribers are prepaid.
The Philippine government liberalized the communications industry in 1993 after a framework
was developed to promote competition within the industry and accelerate market
development. Ten operators were granted licenses to provide CMTS services and deploy the
network technology of their choice – Globe, Innove (previously Islacom), Bayantel, CURE,
Digitel, Extelcom, MultiMedia Telephony, Next Mobile (NEXTEL), Piltel and SMART. Eight
operators continued on to operate commercially except for Bayantel and MultiMedia which
have yet to roll out their CMTS services commercially.
Since 2000, the mobile communications industry experienced a number of consolidations
while new players continued to enter the market. PLDT acquired and consolidated SMART
and Piltel in 2000 while Globe Telecom acquired Islacom. In 2003, Digitel formally launched
its mobile service under the brand name, Sun Cellular. In 2008, SMART purchased CURE
and subsequently launched another wireless brand, Red Mobile. During the same year, San
Miguel Corporation partnered with Qatar Telecom, bought interests in Liberty Telecom
Holdings, Inc., and announced plans to enter the mobile and broadband businesses. .
The mobile market continues to grow as shown in the table below.
Mobile Subscribers (Mn)
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
1.13
1.62
2.68
5.26
10.53
15.17
22.31
32.87
34.61
42.04
54.86
68.03
74.77*
87.79*
Penetration Rates (%)
Growth Rate
1.9
2.5
3.8
8.6
14.2
19.0
27.3
39.4
40.6
48.3
61.2
74.6
80.4
92.6
45%
43%
65%
96%
100%
44%
47%
47%
5%
21%
30%
24%
10%
17%
* Estimated end of year figures.
Source: National Telecommunications Commission (Statistical Data 2007), publicly available information and
Company estimates
In 2010, the mobile industry grew by 17% in SIM terms as nominal penetration rates reached
over 90%, ending with a cumulative industry base of 87.8 million. Globe ended the year with a
SIM base of 26.5 million, with an estimated SIM share of 30% compared to the prior year’s
share of 31%.
With the high penetration level and increasing incidences of multi-SIM usage and shifting of
consumer preferences to unlimited and bulk offers, competition in the mobile market continues
to intensify. Sun Cellular entered the market in 2003 with an unlimited call and text service that
has allowed it to increase its subscriber base. In response to Sun’s unlimited call and text
offers, both Globe and Smart responded by creating a new set of value propositions for their
SEC Form 17A 2010
14
subscribers in the form of bucket SMS and unlimited call and text offerings. In 2008, PLDT
purchased Connectivity Unlimited Resources Enterprises or CURE, one of the four recipients
of 3G licenses awarded by the NTC in 2005. PLDT subsequently launched its own 3G mobile
service under the brand, Red Mobile, further heightening competition in the market. San
Miguel Corporation has also stated their interest in entering the mobile market.
In March 2011, PLDT agreed to a share swap with JG Summit for a controlling stake in Digitel,
Sun Cellular’s Parent Company. With the deal, PLDT will hold a 51.6% stake in Digitel in
exchange of 29.7 million new PLDT shares, representing 13.7% of enlarged total outstanding
shares.
(b) Fixed Line Voice Market
There are at least eight major local exchange carriers (LEC) in the Philippines with licenses to
provide local and domestic long distance services. Each LEC operator (other than PLDT and
Globe, both of whom are authorized to provide nationwide fixed line services) is assigned
service areas in which it must install the required number of fixed lines and provide service.
The NTC has created 15 such service areas in the Philippines. In order to promote network
construction, it has been the government policy to allow only one or two major operators (in
addition to PLDT) in each service area. Rates for local exchange and domestic long distance
services have been deregulated and operators are allowed to have metered as well as flat
monthly fee tariff plans for the services provided.
Over the past three years, several industry players, including Globe, Bayantel, and PLDT,
have introduced fixed wireless voice services that provided some mobile phone capabilities
but had the tariff structure of a fixed line voice service. Subscribers to this fixed wireless
voice service were able to enjoy limited mobility.
Industry size has been relatively flat, with the number of lines in service estimated at over 3.3
million lines as of December 31, 2010 with PLDT’s subscriber market share at 56%, followed
by Globe (19%), Bayantel (13%) and Digitel (12%).
Competition in the fixed line voice market intensified over the past 4 years as the major
players, Globe, Bayantel, Digitel and PLDT introduced fixed wireless voice services with
limited mobile phone capabilities to take advantage of the increasing preference for mobile
services. Fixed wireless services were initially offered in postpaid versions in selected areas
where there were no available fixed line facilities but prepaid kits were eventually made
available as coverage was expanded.
(c) Fixed Line Data Market
The fixed line data business is a growing segment of the fixed line industry. As the Philippine
economy grows, businesses are increasingly utilizing new networking technologies and the
internet for critical business needs such as sales and marketing, intercompany
communications, database management and data storage. 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.
Dedicated business units have been created and organized within the Company to focus on
the mobile and fixed line needs of specific market segments and customers – be they
residential subscribers, wholesalers and other large corporate clients or smaller scale
industries. This structure has also been driven by Globe’s corporate clients’ preferences for
integrated mobile and fixed line communications solutions.
(d) Broadband Market
Broadband continues to be a major growth area for the local telecom industry. Industry
subscribers grew by about 40% to 3.6 million in 2010 from 2.6 million the previous year. The
aggressive network roll-out of the various operators, the wider availability of affordable
prepaid broadband packages, as well as lower PC and USB internet stick prices were the
SEC Form 17A 2010
15
main drivers of subscriber growth. Operators used both wired and wireless technologies
(including 3G and WiMax) to serve the growing demand for internet connectivity.
While household penetration rates remained low, competition in this space was intense.
Operators accelerated the rollout of their broadband network, and introduced more affordable
and bundled offerings.
As of end 2010, Globe had 1.1 million subscribers, up by 50% from the prior year. The
Company’s subscriber share was estimated at 31% from 28% the year before. PLDT had 2.0
million subscribers with a subscriber share of 56%, from 64% the year before. Globe and
PLDT accounted for almost 86% of cumulative subscribers of 3.6 million with much of the
growth in subscribers coming from the prepaid segment.
In February 2010, Liberty Telecoms Holdings, Inc, a partnership between San Miguel
Corporation and Qtel Group of Qatar Telecom, launched its WiMAX broadband service under
the brand name Wi-Tribe. It ended the year with an estimated 11,000 subscribers.
(e) International Long Distance Market
Total outbound international long distance (ILD) traffic in the Philippines has grown with the
increasing affordability of the service and the continued deployment of Filipinos workers
overseas. Meanwhile, inbound international traffic is lower with the wider range of
communication modes now available including via email, instant messaging, social network
sites, and voice over IP. International long distance providers in the Philippines generate
revenues from both inbound and outbound international call traffic whereby the pricing of calls
is based on agreed international settlement rates. Similarly, settlement rates for international
long distance traffic are based on bilateral negotiations. Commercial negotiations for these
settlement rates are settled using a termination rate system where the termination rate is
determined by the terminating carrier (e.g. Philippines) in negotiation with the originating
foreign correspondent.
To date, there are eleven licensed international long distance operators, nine of which directly
compete with Globe for customers. Both Globe and Innove offer ILD services which cover
international calls between the Philippines and over 200 countries. To drive growth in this
segment, the Company offers discounted call rates to popular calling destinations, sustains its
usage campaigns and marketing efforts for OFW SIM packs, and ensures the availability of
popular prepaid load denominations.
2. Principal Competitive Strengths of the Company
(a) Market Leadership Position
Globe is a major provider of telecommunications services in the Philippines. It is a strong
player in the market and operates one of the largest and most technologically-advanced
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’s distinct competitive strengths include its
technologically advanced mobile, fixed line and broadband network, a substantial subscriber
base, high quality customer service, a well-established brand identity and a solid track record
in the industry.
(b) Strong Brand Identity
The Company has some of the best-recognized brands in the Philippines. This strong brand
recognition is a critical advantage in securing and growing market share, and significantly
enhances Globe’s ability to cross-sell and push other product and service offerings in the
market.
(c) Financial Strength and Prudent Leverage Policies
Globe’s financial position remains strong with ample liquidity, and debt at conservative levels.
At the end of 2010, Globe had total interest bearing debt of P50.4 billion representing 52% of
SEC Form 17A 2010
16
total book capitalization. Consolidated gross debt to equity ratio stood at 1.07:1 and is well
within the 2:1 debt to equity limit prescribed by its debt covenants. Additionally, 86% of its debt
is in pesos while the balance of 14% is denominated in US dollars. Expected US dollar inflows
from the business offset any unhedged US dollar liabilities, helping insulate Globe’s balance
sheet from any volatilities in the foreign exchange markets.
Globe intends to maintain its strong financial position through prudent fiscal practices including
close monitoring of its operating expenses and capital expenditures, debt position,
investments, and currency exposures. Globe believes that it has sufficient financial flexibility to
weather the current economic downturn and pursue its strategies.
(d) Proven Management Team
Globe has a strong management team with the proven ability to execute on its business plan
and achieve positive results. With its continued expansion, it has been able to attract and
retain senior managers from the telecommunications, consumer products and finance
industries with experience in managing large scale and complex operations.
(e) Strong Shareholder Support
The Company’s principal shareholders are Ayala Corporation (AC) and Singapore Telecom
(STI), both industry leaders in the country and in the region. Apart 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.
Since 1993, they have invested approximately P23.0 billion in the Company.
F. Suppliers
Globe works with both local and foreign suppliers and contractors. Equipment and technology
required to render telecommunications services are mainly sourced from foreign countries. Its
principal suppliers, among others, are as follows:
For mobile – Nokia/Siemens (Finland); Ericsson Radio Systems AB (Sweden), Ericsson
(Sweden), Alcatel (France) and Microwave Networks Inc. (US).
For fixed line and broadband – Fujitsu Ltd. (Japan), Lucent Technologies (USA), NEC (Japan),
Alcatel (Italy), Motorola (USA), AT&T Global (US), British Telecom (UK), and Singapore Telecom
(Singapore) and Tellabs (USA/Singapore) and NERA (Norway).
G. Customers
Globe has a large subscriber base dispersed throughout the country. On the mobile front, the
Company ended the year with 26.5 million mobile subscribers/SIMs, comprised of 1.1 million
postpaid and approximately 25.4 million prepaid subscribers. Meanwhile, Globe has around
619,000 fixed line voice subscribers and around 1.1 million broadband customers.
No single customer and contract accounted for more than 20% of the Company’s total sales in
2010.
SEC Form 17A 2010
17
H. Transactions with Related Parties
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. These transactions,
which are accounted for at market prices normally charged to unaffiliated customers for similar
goods and services, include the following:
Entities with joint control over Globe Group
•
Globe Telecom has interconnection agreements with STI. The related net traffic
settlements receivable (included in “Receivables” account in the consolidated
statements of financial position) and the interconnection revenues earned (included in
“Service revenues” account in the consolidated statements of comprehensive income)
are as follows:
(In Thousand Pesos)
Traffic settlements receivable – net
Interconnection revenues
•
2010
P
= 124,319
1,857,336
2009
P
= 34,487
2,097,734
2008
P
= 216,348
1,817,912
Globe Telecom and STI have a technical assistance agreement whereby STI will
provide consultancy and advisory services, including those with respect to the
construction and operation of Globe Telecom’s networks and communication services
(see Note 25.6 of attached Notes to Financial Statements), equipment procurement and
personnel services. In addition, Globe Telecom has software development, supply,
license and support arrangements, lease of cable facilities, maintenance and restoration
costs and other transactions with STI.
The details of fees (included in repairs and maintenance under the “General, selling and
administrative expenses” account in the consolidated statements of comprehensive
income) incurred under these agreements are as follows:
(In Thousand Pesos)
Technical assistance fee
Maintenance and restoration
costs and other transactions
Software development,
supply, license and support
2010
P
= 149,662
2009
P
= 99,903
2008
P
= 83,514
86,901
216,701
216,813
26,904
26,924
2,637
The net outstanding balances due to STI (included in the “Accounts payable and
accrued expenses” account in the consolidated statements of financial position) arising
from these transactions are as follows:
(In Thousand Pesos)
Technical assistance fee
Software development,
supply, license and support
Maintenance and restoration
costs and other transactions
•
2009
P
= 24,180
2008
P
= 23,838
26,640
45,734
28,569
28,818
33,555
115,243
Globe Telecom earns subscriber revenues from AC. The outstanding subscribers
receivable from AC (included in “Receivables” account in the consolidated statements of
financial position) and the amount earned as service revenue (included in the “Service
revenues” account in the consolidated statements of comprehensive income) are as
follows:
(In Thousand Pesos)
Subscriber receivables
Service revenues
•
2010
P
= 48,870
2010
P
= 920
5,696
2009
P
= 103
4,034
2008
P
= 173
5,235
Globe Telecom reimburses AC for certain operating expenses. The net outstanding
liabilities to AC related to these transactions amounted to P
= 31.34 million and P
= 23.68
SEC Form 17A 2010
18
million as of December 31, 2009 and 2008, respectively. There is no outstanding liability
as of December 31, 2010. Balances related to these transactions (included in “General,
selling and administrative expenses” account in the consolidated statements of
comprehensive income) amounted to P
= 26.85 million, P
= 21.12 million and P
= 70.76 million,
as of December 31, 2010, 2009 and 2008, respectively.
Joint Ventures in which the Globe Group is a venturer
•
Globe Telecom has preferred roaming service contract with BMPL. Under this contract,
Globe Telecom will pay BMPL for services rendered by the latter which include, among
others, coordination and facilitation of preferred roaming arrangement among JV
partners, and procurement and maintenance of telecommunications equipment
necessary for delivery of seamless roaming experience to customers. Globe Telecom
also earns or incurs commission from BMPL for regional top-up service provided by the
JV partners. The net outstanding liabilities to BMPL related to these transactions
amounted to P
= 2.89 million and P
= 1.02 million and P
= 2.12 million as of December 31,
2010, 2009 and 2008 respectively. Balances related to these transactions (included in
“General, selling and administrative expenses” account in the consolidated statements
of comprehensive income) amounted to P
= 12.07 million, P
= 23.98 million and P
= 9.69 million,
as of December 31, 2010, 2009 and 2008, respectively.
•
On October 2009, the Globe Group entered into an agreement with BPI Globe BanKO
for the pursuit of services that will expand the usage of GCash technology. As a result,
the Globe Group recognized revenue amounting to P
= 9.99 million in 2009. The related
receivables amounted to P
= 9.19 million and P
= 11.19 million in 2010 and 2009,
respectively.
Transactions with the retirement fund
•
On February 1, 2009, the Globe Group entered into a memorandum of agreement
(MOA) with BEAM for the latter to render mobile television broadcast service to Globe
subscribers using the mobile TV service. As a result, the Globe Group recognized an
expense (included in “Professional and other contracted services”) amounting to P
=
250.00 million and P
= 245.58 million in 2010 and 2009, respectively.
•
On October 1, 2009, the Globe Group entered into a MOA with Altimax Broadcasting
Co., Inc. (Altimax), a subsidiary of BHI, for the Globe Group’s co-use of specific
frequencies of Altimax’s for the rollout of broadband wireless access to the Globe
Group’s subscribers. As a result, the Globe Group recognized an expense (included in
“General, selling and administrative Expenses” account in the consolidated statements
of comprehensive income) amounting to P
= 90.00 million and P
= 70.00 million in 2010 and
2009, respectively.
Transactions with other related parties
Globe Telecom has subscriber receivables (included in “Receivables” account in the
consolidated statements of financial position) and earns service revenues (included in the
“Service revenues” account in the consolidated statements of comprehensive income) from
its other related parties namely, Ayala Land Inc., Ayala Property Management Corporation,
BPI, Manila Water Company, Inc., Integrated Microelectronics, Inc., eTelecare Global
Solutions, Inc., HR Mall Incorporated, Honda Cars, Inc. and Isuzu Automotive Dealership, Inc.
These amounted to:
2009
(In Thousand Pesos)
P
= 158,275
P
= 99,689
245,490
149,232
2008
2010
Subscriber receivables
Service revenues
P
= 99,769
203,586
The total expenses incurred on leases, utilities, customer contact services, other
miscellaneous services and purchase of vehicles provided to the Globe Group by these other
related parties included under “General, selling and administrative expenses” account in the
consolidated statements of comprehensive income amounted to P
= 270.82 million, P
= 282.06
million and P
= 248.89 million as of December 31, 2010, 2009 and 2008, respectively, and
“Property and equipment” in the consolidated statements of financial position amounted to P
=
SEC Form 17A 2010
19
78.32 million, P
= 55.99 million and P
= 114.22 million as of December 31, 2010, 2009 and 2008,
respectively. The outstanding balances due related to these expenses amounted toP
= 21.50
million, P
= 14.91 million and P
= 5.72 million as of December 31, 2010, 2009 and 2008,
respectively.
These related parties are either controlled or significantly influenced by AC.
Transactions with key management personnel of the Globe Group
The Globe Group’s compensation of key management personnel by benefit type are as
follows:
Short-term employee benefits
Share-based payments
Post-employment benefits
2010
2009
(In Thousand Pesos)
P
= 1,948,311
P
= 1,867,128
104,788
126,437
132,406
53,290
P
= 2,185,505
P
= 2,046,855
2008
P
= 1,833,508
182,324
112,620
P
= 2,128,452
There are no agreements between the Globe Group and any of its directors and key
officers providing for benefits upon termination of employment, except for such benefits
to which they may be entitled under the Globe Group’s retirement plans.
The Globe Group granted short-term loans to its key management personnel amounting
to P
= 30.66 million, P
= 33.37 million and P
= 21.32 million in 2010, 2009 and 2008,
respectively, included in the “Prepayments and other current assets” in the consolidated
statements of financial position.
The summary of consolidated outstanding balances resulting from transactions with
related parties follows:
2010
Subscriber receivables (included in
“Receivables” account)
Traffic settlements receivable - net
(included in “Receivables” account)
Other current assets
Accounts payable and accrued expenses
2009
(In Thousand Pesos)
2008
P
= 168,381
P
= 110,978
P
= 99,942
124,319
5,461
128,719
34,487
1,475
150,747
216,348
2,602
199,172
In May 2008, the NTC approved the assignment of Innove’s prepaid consumer
subscriber contracts in favor of Globe Telecom. The transfer did not result in the
recognition of a gain or loss in the consolidated financial statements.
SEC Form 17A 2010
20
I. Licenses, Patents, and Trademarks
Globe Telecom currently holds the following major licenses:
Service
Globe
Wireless
Local Exchange Carrier
International Long Distance
Interexchange Carrier
VSAT
International Cable Landing
Station & Submarine Cable
System (Nasugbu, Batangas)
International Cable Landing
Station & Submarine Cable
System (Ballesteros,
Cagayan)
Innove
Wireless
Local Fixed line
International Long Distance
Interexchange Carrier
Type of
License
Date Issued or
Last Extended
Expiration Date
CPCN (1)
CPCN (1)
CPCN (1)
CPCN (1)
CPCN (1)
CPCN (1)
July 22, 2002
July 22, 2002
July 22, 2002
February 14, 2003
February 6, 1996
October 19, 2007
December 24, 2030
December 24, 2030
December 24, 2030
December 24, 2030
February 6, 2021
December 24, 2030
CPCN (1)
June 29, 2010
December 24, 2030
Type of
License
(1)
CPCN
CPCN (1)
CPCN (1)
CPCN (1)
Date Issued or Last
Extended
July 22, 2002
July 22, 2002
July 22, 2002
April 30, 2004
Expiration Date
April 10, 2017
April 10, 2017
April 10, 2017
April 10, 2017
1
Certificate of Public Convenience and Necessity. The term of a CPCN is co-terminus with the franchise term.
In July 2002, the NTC issued CPCNs to Globe and Innove which allow Globe to operate
respective services for a term that will be predicated upon and co-terminus with Globe’s
congressional franchise under RA 7229 (Globe) and RA 7372 (Innove). Globe was granted
permanent licenses after having demonstrated legal, financial and technical capabilities in
operating and maintaining wireless telecommunications systems, local exchange carrier services
and international gateway facilities. Additionally, Globe and Innove have exceeded the 80%
minimum roll-out compliance requirement for coverage of all provincial capitals, including all
chartered cities within a period of seven years.
Globe also registered the following brand names with the Intellectual Property Office, the
independent regulatory agency responsible for registration of patents, trademarks and technology
transfers in the Philippines: Globe, Globe Load, Globe Commerce, Globe International, Globe
Platinum, Globe Kababayan, Globe Plans, Globe Calls, Globe Labs, Globe GCash, Connected
24ever and Device, Gloo Netwrkz, Globe Landline Postpaid Plus, Globe Share-A-Load, Globe
Kababayan, Globe Broadband, Globe Telecom, Pixlink, Unlichat, Appzone, Tipidd, Wizard, Duo
Mobile Plus Landline in One, Astig Ang Signal ng TM, Globe Tattoo, Globe Duo, Astig Ang
Signal, Republika Ng TM Astig Tayo Dito, Tattoo, Astig, Astig Rewards, Astigunli, Astig Load,
Astig Pabonus Reward, TM Diskarte, Immortalload, AstigTawag, Astigtxt, Todo Bigay
Habambuhay, Duoplus, Load4life, Call4Life, Text4Life, Globe Text, Todo Text, Globe Tattoo
Youniverse, Immortaltxt, Superduo, Globe All you Can, Ka-Globe Retailer Club, and Muzta!
Further, Globe also applied and registered the following brand names: Globe Telecom, Globe and
Globe Life Device, Globe GCash, Globe Kababayan, Globe Autoload Max, Globe M-Commerce
Hub, Muzta, and Smiley With Salakot Device in Benelux, Denmark, Portugal, Spain, Sweden,
Ireland, Singapore, Hong Kong, United Kingdom, Japan, Taiwan, Macau, Qatar, UAE, USA,
Australia, Korea, Canada, and Malaysia.
Innove registered "Innove Communications" and Gxchange registered "GXchange" with the
Intellectual Property Office.
SEC Form 17A 2010
21
J. Government approvals/regulations
The Globe Group is regulated by the NTC under the provisions of the Public Service Act (CA
146), Executive Order (EO) 59, EO 109, and RA 7925. Under these laws, Globe is required to do
the following:
(a)
To secure a CPCN/PA (Provisional Authority) from the NTC for those services it offers which
are deemed regulated services, as well as for those rates which are still deemed regulated,
under RA 7925.
(b)
To observe the regulations of the NTC on interconnection of public telecommunications
networks.
(c)
To observe (and has complied with) the provisions of EO 109 and RA 7925 which impose an
obligation to rollout 700,000 fixed lines as a condition to the grant of its provisional
authorities for the cellular and international gateway services.
(d)
Globe remains under the supervision of the NTC for other matters stated in CA 146 and RA
7925 and pays annual supervision fees and permit fees to the NTC.
On October 19, 2007, the NTC granted Globe a CPCN to operate and maintain an International
Cable Landing Station and submarine cable system in Nasugbu, Batangas
On May 19, 2008, Globe Telecom, Inc. announced that the NTC has approved the assignment
by its wholly-owned subsidiary Innove Communications (Innove) of its Touch Mobile (TM)
consumer prepaid subscriber contracts in favor of Globe. Globe would be managing all migrated
consumer mobile subscribers of TM, in addition to existing Globe subscribers in its integrated
cellular network.
On September 11, 2008, the NTC granted Globe a PA to establish, install, operate and maintain
an International Cable Landing Station in Ballesteros, Cagayan Province. The PA expired last
March 10, 2010 and Globe has applied for the issuance of a CPCN/extension of the PA last Feb.
15, 2010.
On June 29, 2010, the NTC granted Globe a CPCN to operate and maintain an International
Cable Landing Station and submarine cable system in Ballesteros, Cagayan.
K. Research and Development
Globe did not incur any research and development costs from 2008 to 2010.
L. Compliance with Environmental Laws
The Globe Group complies with the Environmental Impact Statement (‘EIS’) system of the
Department of Environment and Natural Resources (‘DENR’) and pays nominal filing fees
required for the submission of applications for Environmental Clearance Certificates (‘ECC’) or
Certificates of Non-Coverage (‘CNC’) for its cell sites and certain other facilities, as well as
miscellaneous expenses incurred in the preparation of applications and the related environmental
impact studies. The Globe Group does not consider these amounts material.
Globe has not been subject to any significant legal or regulatory action regarding non-compliance
to relevant environmental regulations.
M. Employees
The Globe Group has 5,667 active regular employees as of December 31, 2010, of which about
9% are covered by a Collective Bargaining Agreement (CBA) through the Globe Telecom
Employee’s Union (GTEU).
The Company has a long-standing, healthy, and constructive relationship with the GTEU
characterized by industrial peace. It is a partnership that mutually agrees to focus on shared
SEC Form 17A 2010
22
goals – one that has in fact allowed the attainment of higher levels of productivity and consistent
quality of service to customers across different segments.
Strong partnership and mutual understanding between the company and the union has been
continuously demonstrated throughout the years. In fact, throughout the many changes and
transformations initiated by the Company to achieve its goals, the union has been there, working
hand in hand with the Company in support of its business goals.
GTEU and Globe has recently concluded its 5-year collective bargaining agreement for year
2011-2015, a living testament to the strong and peaceful relationship between the two.
Breakdown of employees by main category of activity from 2008 to 2010 are as follows:
Employee Type
Rank & File, CBU
Supervisory
Managerial
Executives
2010
2,844
1,683
839
301
2009
2,750
1,600
800
301
2008
3,125
1,656
773
296
Total *
5,667
5,451
5,850
*Includes Globe, Innove, & GXI (excluding Secondees)
Globe continues to explore new ways to enhance employee productivity and realize operating
efficiencies. The Company believes that these initiatives will improve corporate agility, enhance
Globe’s overall competitiveness and strengthen its position as a service leader in the telecom
industry, thereby enhancing shareholder value.
N. Risk Factors
1. Foreign Exchange Risk
Globe’s foreign exchange risk results primarily from movements of the Philippine peso (PHP)
against the US dollar (USD) with respect to its USD-denominated financial assets, liabilities,
revenues and expenditures. Approximately 27% of its revenues are in USD while substantially all
of its capital expenditures are in USD. In addition, 15%, 14% and 12% of debt as of December
31, 2010, 2009 and 2008, respectively, are denominated in USD before taking into account any
swap and hedges.
Globe’s foreign exchange risk management policy is to maintain a hedged financial position after
taking into account expected USD flows from operations and financing transactions. It enters into
short-term foreign currency forwards and long-term foreign currency swap contracts in order to
achieve this target.
The Company mitigates its foreign exchange risk through the following:
First, the Company has foreign currency-linked revenues which include those (a) billed in foreign
currency and settled in foreign currency; (b) billed in pesos at rates linked to a foreign currency
tariff and settled in pesos, or (c) fixed line monthly service fees and the corresponding application
of the Currency Exchange Rate Adjustment (CERA) mechanism under which Globe has the
ability to pass the effects of local currency depreciation to its subscribers.
Second, Globe enters into short-term currency forwards to manage foreign exchange exposure
related to foreign currency denominated monetary assets and liabilities while it enters into long
term foreign currency and interest rate swap contracts to manage foreign exchange and interest
rate exposures of certain long term foreign currency denominated loans.
There are no assurances that declines in the value of the Peso will not occur in the future or that
the availability of foreign exchange will not be limited. Recurrence of these conditions may
adversely affect Globe’s financial condition and results of operations.
SEC Form 17A 2010
23
2. Industry and Operational Risks
(a) Competitive Industry
Competition remains intense in the Philippine telecommunications industry as current
operators seek to increase market share with aggressive offerings while new entrants serve
to further heighten the competitive dynamics amidst a maturing mobile market. Globe’s
principal competitors are the PLDT/SMART and Digitel groups which offer popular services
such as mobile, fixed line as well as broadband services. Other players licensed to provide
mobile services include Bayantel, which has yet to launch its mobile services, and Extelcom.
The Philippine telecommunications industry continues to be dominated by the mobile
segment which contributed an estimated 66% of total industry revenues in 2010, lower than
the 68% it registered in 2009. Mobile subscriber growth has slowed down with nominal
penetration rates now in excess of 90%. Industry revenue growth has likewise slowed in
recent years, and has actually contracted in 2010 in spite of the significant rise in voice and
data traffic. Aggressive price competition have contributed to the decline in industry revenues,
and the continued shift in traffic from the standard pay-per-use services to unlimited and
bucket offers have put pressure on industry revenues and margins. The strong peso has also
negatively affected US$-linked revenues.
The continued growth and development of the mobile industry will depend on many factors.
Any significant economic, technological or regulatory development could result in either a
slowdown or growth in demand for mobile services and may impact Globe’s business,
revenues and net income. Globe’s mobile revenues in 2010 and 2009 accounted for 81% and
85%, respectively of its total service revenues.
(b) Highly Regulated Environment
Globe is regulated by the NTC for its telecommunications business, and by the SEC and the
BSP for other aspects of its business. The introduction of, changes in, or the inconsistent or
unpredictable application of laws or regulations from time to time, may materially affect the
operations of Globe, and ultimately the earnings of the Company which could impair its ability
to service debt. There is no assurance that the regulatory environment will support any
increase in business and financial activity for Globe.
The government’s communications policies have been evolving since 1993 when former
President Fidel V. Ramos initiated a more liberalized Philippine communications industry.
Changes in regulations or government policies or differing interpretations of such regulations
or policies have affected, and will continue to affect Globe’s business, financial condition and
results of operation. The NTC was established in 1979 to act as an independent regulatory
body to oversee, administer and implement the policies and procedures governing the
communications industry. The NTC grants licenses for varied terms. It may grant a long-term
license, called a certificate of public convenience and necessity (“CPCN”). Globe has
obtained CPCNs for its international gateway facility (“IGF”), local exchange carrier (“LEC”),
cellular mobile telephony service (“CMTS”), and interexchange carrier (“IXC”) services.
Though valid for 25 years, the NTC may amend certain terms of a CPCN, or revoke it for
cause, subject to due process procedures. Additionally, the exercise of regulatory power by
regulators, including monetary regulators, may be subject to review by the courts on the
complaint of affected parties.
No assurance can be given that the regulatory environment in the Philippines will remain
consistent or open. Current or future policies may affect the business and operations of
Globe.
SEC Form 17A 2010
24
(c) Philippine Political and Economic Factors
The growth and profitability of Globe may be influenced by the overall political and economic
situation of the Philippines.
(i) Economic Considerations
The Philippines has in the past experienced periods of slow or negative growth, high inflation,
and volatility in its exchange rate.
In 2010, the Philippine economy recovered strongly from the global economic recession in
2009, driven by the rebound in exports, increased private consumption on the back of higher
consumer confidence, sustained fiscal policy easing, and the acceleration of the outsourcing
industry that directly benefited the BPO sector of the country as well as indirectly spurred
growth for the other associated sector like construction. The economic growth also benefited
from the relatively peaceful 2010 national elections through increased election-related
spending, and renewed trust and confidence in the newly elected government.
In sharp contrast to 2009, when the country narrowly escaped a recession with Gross
Domestic Product (GDP) growing by a mere 1.1%, the 2010 annual GDP growth was at 7.3%
the highest rate of growth in the post-Marcos era. Economic performance in the year well
surpassed the government’s target growth of 5% to 6%, with services and the industry
sectors posting strong expansions, and despite the setback in the agricultural sector which
suffered from the effects of the El Niño phenomenon. The industry sector was the main
reason behind the high GDP growth rate, expanding by 12.1% compared to last year’s 0.9%
decline. Manufacturing was the main driver for the sector, supported by growth in the
construction and electricity, gas and water sectors. Services remained resilient, expanding by
7.1% on the back of the strong showing of trade, finance and private services, which
benefited from the acceleration in global outsourcing. These increases were partially
tempered by the continued weakness in the Agriculture, Fishery and Forestry (AFF) sector,
which posted a decline of 0.5%.
On the demand side, private consumption, which comprises over 78% of the country’s total
GDP, grew by 5.3% in 2010 on the back of high consumer spending fueled by improved
consumer confidence complemented by stimulus provided by election-related
spending. Investments in fixed capital also expanded with private construction requirements
expanding by 19.1% and investments in durable equipment growing by 25.7%. Supporting
domestic consumption was the sustained influx of OFW remittances, which increased from
US$17.3 billion in 2009 to US$18.8 billion in 2010. The BSP sustained its accommodative
stance, reducing its key policy rates to a record low of 4% for overnight borrowing and 6% for
overnight lending to help stimulate bank lending.
In 2010, Standard & Poor’s (“S&P”) upgraded its rating for the Philippines by a notch to “BB “
(two notches below investment grade) rating, which was the first rating upgrade the country
received from S&P in 13 years. Moody’s Investors Service (“Moody’s”) also upgraded its
sovereign credit rating of the Philippines to “Ba3” (three notches below investment grade)
from B1 in July 2009, citing “prospects for the (Philippine) economy remain good, but a
1
number of crucial challenges are apparent.” Meanwhile, Fitch Ratings (“Fitch”), the only
remaining credit rating agency that has yet to revise its assessment on Philippine Sovereign
Debt, maintains its long-term foreign currency debt rating of the Philippines of “BB” (two
notches below investment grade).
While the economy is expected to continue its expansion in 2011, certain events in the
current year have tempered expectations. The global economy remains at a fragile state,
with its recovery further hampered by the uncertainties arising from the armed conflict in
Middle East and North Africa and its impact on oil prices, and the recent devastating
earthquake and tsunami that hit the eastern part of Japan, the world’s third largest economy.
These events could negatively impact the country’s growth prospects and as such, could
materially and adversely affect Globe’s business, financial condition and results of operations,
1
Moody’s Global Credit Research Announcement – Philippines dated March 29, 2010
SEC Form 17A 2010
25
including Globe’s ability to enhance the growth of its subscriber base, improve its revenue
base and implement its business strategies.
(ii) Political Considerations
The Philippines has from time to time experienced political, social and military instability. In
February 1986, a peaceful civilian and military uprising ended the 21-year rule of President
Ferdinand Marcos and installed Corazon Aquino as President of the Philippines. Between
1986 and 1989, there were a number of attempted coups d’état against the Aquino
administration, none of which was successful.
Political conditions in the Philippines were generally stable during the mid to late 1990s
following the election of Fidel Ramos as President in 1992. His successor, Joseph Estrada
was subject to various allegations of corruption. He was eventually ousted from office
following impeachment proceedings, mass public protests and the withdrawal of support by
the military on corruption charges. Following President Estrada’s resignation, then Vice
President Gloria Macapagal Arroyo was sworn in as President on January 20, 2001.
President Arroyo was subjected to various impeachment complaints during her term. These
impeachment complaints involved various allegations including the manipulation of the results
of the presidential election in 2004, corruption and bribery. These complaints have fueled
mass protests led by various cause-oriented groups calling for the President to resign.
The Philippines held its most recent elections in May 2010, which marked the first attempt of
the Commission on Elections to implement a computerization of the national elections that
includes presidential, legislative and local positions. The elections have been deemed a
success, with the automation of the process and the relative decrease in election-related
violence adding credibility to the results. In June 2010, Benigno “Noynoy” Aquino III was
th
inaugurated as the 15 President of the Philippines. The son of former President Corazon
Aquino garnered over 40% of the vote and has injected the country with renewed optimism.
Despite the recent successful national elections, there can be no assurance that the future
political environment in the Philippines will be stable or future governments will adopt
economic policies conducive to sustaining economic growth. The growth and profitability of
Globe may be influenced by the overall political and economic situation of the Philippines.
Any political instability in the Philippines could negatively affect the country’s general
economic conditions which in turn could adversely affect Globe’s business, financial condition
or results of operations.
SEC Form 17A 2010
26
O. Management of Risks
Cognizant of the dynamism of the business and the industry and in line with its goal to
continuously enhance value for its stakeholders, Globe Telecom has put in place a robust risk
management approach that is fully integrated in its strategy planning, execution and day-to-day
operations.
As part of its strategy management calendar, senior management and key leaders regularly
conduct an enterprise–wide assessment of risks focused on identifying the key risks that could
threaten the achievement of Globe’s business objectives, both at the corporate and business unit
level, as well as specific plans to mitigate or manage such risks.
Risks are prioritized, depending on their impact to the overall business and the effectiveness by
which these are managed. Risk mitigation strategies are developed, updated and continuously
reviewed for effectiveness, and are also monitored through various control mechanisms.
Globe employs a two-dimensional view of risk monitoring. Senior Management’s scorecard
includes the status of risk mitigation plans as they relate to the attainment of a particular business
objective. Enterprise Risk Owners, on the other hand, regularly monitor and report the status of
the approved mitigation plans meant to address the key risks.
Annually, Globe conducts an Enterprise Risk Management Performance Evaluation which serves
as a basis for continuously improving our Risk Management processes and capabilities. (For
additional information on Enterprise Risk Management see Part V - Corporate Governance
section)
P. Debt Issues
For details on Globe Group’s Notes payable and Long Term debt, see Note 14 of the
attached Notes to the 2010 Audited Financial Statements.
SEC Form 17A 2010
27
Item 2. Properties
A. Buildings and Leasehold Improvements
Globe owns several floors of Pioneer Highlands Towers 1 and 2, located at Pioneer Street in
Mandaluyong City, which serves as its corporate headquarters. This building was later renamed
as Globe Telecom Plaza. Globe also started construction work on its future Head Office in the
Fort Bonifacio Global City Taguig, which is expected to be completed by 2013. In addition, the
Company also owns host exchanges in the following areas: Bacoor, Batangas, Ermita, Iligan,
Makati, Mandaluyong, Marikina, Vito Cruz, Cubao-Aurora, among others.
The Company leases office spaces along Sen. Gil Puyat Avenue, EDSA and Ermita for our
technical, administrative and logistics offices and host exchange, respectively. It also leases the
space for most of its 134 Globe Stores, 11,660 base stations and 6,698 cell sites throughout the
Philippines.
Globe’s existing business centers and cell sites located in strategic locations all over the country
are generally in good condition and are covered by specific lease agreements with various lease
payments, expiration periods and renewal options. As the Company continue to expand its
network in the next 12 months, Globe intends to lease more spaces for additional cell sites,
stores, and support facilities with lease agreements, payments, expiration periods and renewal
options that are undeterminable at this time. (For additional details on Buildings and Leasehold
Improvements see Note 7 of the attached notes to the 2010 Audited Financial Statements)
B. Telecommunications Equipment
As of 31 December 2010, the Company has mobile switching centers, 2G and 3G mobile
switching systems, transit switching centers and home location registers located in key areas
nationwide. It also utilizes a number of short messaging service centers, multimedia messaging
service centers and a wireless application protocol gateway to handle its SMS and value-added
services traffic.
The infrastructure for Innove’s fixed telephone service includes a number of telephone switching
exchanges and remote switching units in key locations in Metro Manila, the National Capital
Region, Visayas and Mindanao. The Company has 1.5 million installed fixed lines.
For its international and domestic long distance telephony business, Globe has a number of toll
switching systems in the National Capital Region, Visayas and Mindanao. It also operates
international gateway facilities to serve its international connectivity requirements.
Globe also has a national transmission network that includes a microwave Synchronous Digital
Hierarchy (‘SDH’) backbone that stretches from the northern part of Luzon to the southern part of
Mindanao, supplemented by leased fiber optic networks in urban areas. Globe also established,
operates and maintains a Fiber Optic Backbone Network (‘FOBN’) linking the Luzon, Visayas and
Mindanao island groups to complement its microwave facilities and which offers flexibility for
future telecommunications technology including broadband, GPRS, 3G and broadband data
nd
transmission. In November 2009, Globe completed work on its 2 FOBN which is expected to
provide additional capacity and improve redundancy to its existing FOBN.
SEC Form 17A 2010
28
C. Investments in Cable Systems
To provide resiliency and geographic diversity, Globe has also invested in several submarine
cable systems, which the Company either owns or leases a share of the systems’ total capacity.
Investments in cable systems include the cost of the Globe Group’s ownership share in the
capacity of certain cable systems under Construction & Maintenance Agreements; or indefeasible
rights of use (IRUs) under Capacity Purchase Agreements.
To date, Globe has investments in the following cable systems (shown below with their major
connectivity paths):
APCN2 – Asia Pacific Cable Network-2 (Trans-Asian region);
China-U.S. – (connects North Asia, mainly China to the United States);
C2C – City-to –City (Trans-Asian region);
SEA-ME-W3 – Southeast Asia-Middle East-Western Europe;
SJC – Southeast Asia Japan Cable System – connects Singapore, Hong Kong,
Japan and the Philippines, with possible branches to other Asian destinations
(expected to be operational by 2013)
TGN-IA – Tata Global Network – Intra Asia cable system - connects Singapore,
Vietnam, Hong Kong, and the Philippines to the United States; and
The Company also has an international cable landing station located in Nasugbu, Batangas that
lands the C2C cable network, a 17,000 kilometer long submarine cable network linking the
Philippines to Hong Kong, Taiwan, China, Korea, Japan and Singapore. Globe has separately
purchased capacity in the C2C cable network which it subsequently transferred to its subsidiary,
Innove.
Additionally, Globe has acquired capacities, either through lease or IRU, in selected cable
systems where the Company is not a consortium member or a private cable partner. These
include capacities in East Asia Crossing (EAC), Fiber Optic Link Around the Globe (FLAG), Japan
US Cable Network (JUCN), TGN-Pacific and Unity Cable, among others.
On 17 March 2009, Globe formally opened its second international cable landing station in
Ballesteros, Cagayan with the Company being the exclusive landing party in the Philippines to the
Tata Global Network – Intra Asia (TGN-IA) cable system. TGN-IA is a 6,700 kilometer trans-Asian
submarine cable system that links the Ballesteros, Cagayan cable landing station in the
Philippines to Japan, Hong Kong, Vietnam, and Singapore with onward connectivity via the TGNPacific network to Guam and the United States.
On December 2009 Globe signed an agreement to be the exclusive landing party in the
Philippines of the Southeast Asia Japan Cable (SJC) cable system, the highest capacity system
in the world (with an initial design capacity of 17 terabits per second that can be upgraded to 23
tbps). Expected to be completed by 2013, Globe joins some of the biggest names in the industry
including Google, SingTel, KDDI, Telkom Indonesia and Bharti Airtel, to name a few, in this
venture.
For more information on the Company’s properties and equipment, refer to Note 7 of the attached
notes to the consolidated financial statements.
SEC Form 17A 2010
29
Item 3. Legal Proceedings
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.
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.
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 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 Court of Appeals
ordered the reinstatement of the case and has forwarded it to the NTC-Olongapo for trial.
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
SEC Form 17A 2010
30
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 counteraffidavits 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 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.
Item 4. Submission of Matters to a Vote of Security Holders
Except for matters taken up during the annual meeting of stockholders, there was no other matter
submitted to a vote of security holders during the period covered by this report.
SEC Form 17A 2010
31
PART II – OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Issuer’s Equity, Market Price, Dividends and Related Stockholder Matters
A. Capital Stock
Globe Telecom’s authorized capital stock consists of:
Shares
Preferred stock - Series “A” P
= 5 per share
Common stock –
P
= 50 per share
2010
2009
2008
Amount
Shares
Amount
Shares
Amount
(In Thousand Pesos and Number of Shares)
250,000 P
= 1,250,000
250,000 P
= 1,250,000
250,000 P
= 1,250,000
179,934
179,934
179,934
8,996,719
8,996,719
8,996,719
Globe Telecom’s issued and subscribed capital stock consists of:
2010
2009
2008
Amount
Shares
Amount
Shares
Amount
(In Thousand Pesos and Number of Shares)
158,515
P
= 792,575
158,515
P
= 792,575
158,515
P
= 792,575
132,348 6,617,424
132,346 6,617,280
132,340 6,617,008
Shares
Preferred stock
Common stock
Total shares issued and fully
paid
Less subscriptions receivable
1.
–
7,409,999
(776)
P
= 7,409,223
–
7,409,855
(776)
P
= 7,409,079
–
7,409,583
(1,508)
P
= 7,408,075
Preferred Stock
Preferred stock - Series “A” has the following features:
(a) Convertible to one common share after 10 years from issue date on June 29, 2001 at
not less than the prevailing market price of the common stock less the par value of the
preferred shares;
(b) Cumulative and nonparticipating;
(c) Floating rate dividend;
(d) Issued at P
= 5 par;
(e) With voting rights;
(f) Globe Telecom has the right to redeem the preferred shares at par plus accrued
dividends at any time after 5 years from date of issuance; and
(g) Preferences as to dividend in the event of liquidation.
The dividends for preferred shares are declared upon the sole discretion of the Globe’s
BOD. As of December 31, 2010, the Globe Group has dividends in arrears to its preferred
stockholders amounting to P
= 45.40 million.
2.
Common Stock
The rollforward of outstanding common shares are as follows:
2010
2009
2008
Amount
Shares
Amount
Shares
Amount
(In Thousand Pesos and Number of Shares)
132,346 P
= 6,617,280
132,340 P
= 6,617,008
132,334 P
= 6,616,677
2
144
6
272
6
331
132,348 P
= 6,617,424
132,346 P
= 6,617,280
132,340 P
= 6,617,008
Shares
At beginning of year
Exercise of stock options
At end of year
SEC Form 17A 2010
32
B. Market Information
The Company’s common equity is traded at the Philippine Stock Exchange (PSE).
The following table shows the high and low prices of Globe’s shares in the PSE for the past 2
years.
COMMON SHARES
Price Per Share (PHP)
High
Low
Calendar Period
2009
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2010
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
870
995
1,135
1,020
760
805
925
890
1,000
1,035
895
905
915
850
763
771
The price information as of latest practicable trading date: P844 per common share as of April 08,
2011.
C. Holders
There are approximately 4,170 holders of common equity as of 31 December 2010.
following are the top 20 holders of the common equity of the Company:
Stockholder Name
1
Singapore Telecom Int’l. Pte. Ltd.
No. of Common
Shares
62,646,486
The
Percentage
owned out of
total
outstanding
47.33%
2
Ayala Corporation
40,319,263
30.46%
3
PCD Nominee Corp. (Non-Filipino)
20,515,786
15.50%
4
PCD Nominee Corp. (Filipino)
7,843,449
5.93%
5
The First National Co., Inc.
21,001
0.02%
6
Renato O. Marzan
20,000
0.02%
7
Oscar L. Contreras Jr.
17,000
0.01%
8
Insular Life Assurance Co. Ltd.
16,270
0.01%
9
GTESOP2000-002
16,250
0.01%
10
Cedar Commodities, Inc.
12,900
0.01%
11
Eddie L. Hao
10,250
0.01%
12
Bernadette Say Go
10,000
0.01%
12
GTESOP98056
10,000
0.01%
12
GTESOP98057
10,000
0.01%
12
GTESOP98059
10,000
0.01%
12
GTESOP98060
10,000
0.01%
12
GTESOP98061
10,000
0.01%
12
GTESOP98062
10,000
0.01%
12
GTESOP98064
10,000
0.01%
12
GTESOP98063
10,000
0.01%
12
Agaton L. Tiu &/or Remington Tiu
10,000
0.01%
12
GTESOP98054
10,000
0.01%
12
GTESOP98053
10,000
0.01%
12
GTESOP98055
10,000
0.01%
SEC Form 17A 2010
33
12
GTESOP98058
10,000
Percentage
owned out of
total
outstanding
0.01%
13
Florentino P. Feliciano
9,487
0.01%
14
GT ESOP T96002 – Trust Account
9,000
0.01%
14
GT ESOP T95005 – Trust Account
9,000
0.01%
14
GT ESOP T96003 – Trust Account
9,000
0.01%
14
GT ESOP T96005 – Trust Account
9,000
0.01%
14
GT ESOP T96001 – Trust Account
9,000
0.01%
14
GT ESOP T96004 – Trust Account
9,000
0.01%
15
R. Nubla Securities Inc.
8,405
0.01%
16
Jose Tan Yan Doo
8,071
0.01%
17
Ma. Teresa Teng
7,500
0.01%
18
Rufino Y. Luna
7,300
0.01%
19
Ramon Antonio Pineda
7,263
0.01%
20
Alfonso S. Teh
6,720
0.01%
Stockholder Name
No. of Common
Shares
The following are holders of preferred equity securities of the Company:
Stockholder Name
1.
2.
3.
4.
Asiacom Philippines, Inc.
Romeo L. Bernardo
Guillermo D. Luchangco
Ernest L. Cu
No. of Preferred
Shares
158,515,018
1*
1*
1*
Percentage
(of Preferred
Shares)
100.00%
0.00%
0.00%
0.00%
* Nominee shares
SEC Form 17A 2010
34
D. Dividends
Dividends declared by the Company on its shares of stocks are payable in cash or in additional
shares of stock. Cash dividends are subject to approval by the Company's Board of Directors
(‘BOD’) but no stockholder approval is required. Property dividends which may come in the form
of additional shares of stock are subject to approval by both the BOD and the Company's
stockholders.
On January 29, 2004, the BOD of Globe Telecom approved a dividend policy to declare cash
dividends to its common stockholders on a regular basis as may be determined by the BOD from
time to time. The BOD had set out a dividend payout rate of approximately 50% of prior year’s net
income payable semi-annually in March and September of each year. On July 31, 2006, the BOD
of Globe Telecom amended the dividend policy increasing the dividend payout rate to 75% of
prior year’s net income and implemented starting from the second semi-annual cash dividend
declaration in 2006. On November 6, 2009, the BOD of Globe Telecom amended the dividend
payment rate from 75% to a range of 75% to 90% of prior year’s net income. The dividend policy
is reviewed annually; taking into account Globe Telecom’s operating results, cash flows, debt
covenants, capital expenditure levels and liquidity.
1. Stock Dividends
No stock dividends were declared from 2008 to 2010.
2. Cash Dividends
(a) Common shares
AMOUNT/
SHARE(Php)
37.50
87.50
32.00
32.00
50.00
40.00
40.00
CASH DIVIDEND (Per Share)
DECLARATION DATE
RECORD DATE
February 4, 2008
August 5, 2008
February 3, 2009
August 4, 2009
November 6, 2009
February 4, 2010
August 3, 2010
February 18, 2008
August 21, 2008
February 17, 2009
August 19, 2009
November 20, 2009
February 19, 2010
August 17, 2010
PAYMENT DATE
March 13, 2008
September 15, 2008
March 10, 2009
September 15, 2009
December 15, 2009
March 15, 2010
September 13, 2010
(b) Preferred shares
AMOUNT/
SHARE(Php)
0.31
0.38
0.32
CASH DIVIDEND (Per Share)
DECLARATION DATE
RECORD DATE
December 7, 2007
December 2, 2008
December 4, 2009
December 18, 2007
December 18, 2008
December 18, 2009
PAYMENT DATE
March 17, 2008
March 17, 2009
March 18, 2010
i. Cash Dividends Declared After Balance Sheet Date
On February 8, 2011, the BOD approved the declaration of the first semi-annual cash
dividend of P
= 31 per common share, payable to shareholders on record as of February
22, 2011. Total dividends of P
= 4,103 million were paid on March 18, 2011. The BOD
also approved the declaration of the cash dividend on preferred shares amounting to P
=
0.29 per preferred share, payable to preferred stockholder of record as of February 22,
2011. Total dividends amounting to P
= 45.40 million will be payable on March 18, 2011.
SEC Form 17A 2010
35
3. Restrictions on Retained Earnings
The total unrestricted retained earnings available for dividend declaration amounted to
P
= 8,510.85 million as of December 31, 2010. This amount excludes the undistributed net earnings
of consolidated subsidiaries, accumulated equity in net earnings of joint ventures accounted for
under the equity method, and unrealized gains recognized on asset and liability currency
translations and unrealized gains on fair value adjustments. The Globe Group is also subject to
loan covenants that restrict its ability to pay dividends For more information, see Note 14 of the
attached Notes to the Financial Statements).
E. Recent Sale of Unregistered or Exempt Securities, including recent issuance of
securities constituting an exempt transaction
For the past 3 years, the following private placements were undertaken:
Facility
SCB
FMIC
SEC Form 17A 2010
Amounts (in Php Mn)
5,000
5,000
Date Signed
04/09/2008
05/21/2009
36
Item 6. Management’s Discussion and Analysis of Operations
For The Financial Year Ended 2010
GROUP FINANCIAL HIGHLIGHTS
Globe Group
For the Year Ended
Results of Operations (Php Mn)
31-Dec
31-Dec
YoY
2010
2009
Change
(%)
Net Operating Revenues ………………………………………...….
Service Revenues……………………………………………….…..
Mobile 1………………………………………………………….....
Fixed line Voice……………………………………………….…..
Fixed line Data………………………………………………...…..
Broadband……………………………………………………...….
Non-Service Revenues………………………………………….….
Costs and Expenses ………………………………………………...
Cost of Sales…………………………………………………………
Operating Expenses ………………………………………………..
EBITDA …………………………………………………………………
EBITDA Margin………………………………………………………..
Depreciation and Amortization……………………………………..
EBIT …………………………………………………………………….
EBIT Margin……………………………………………………………
Financing……………………………………………………………….
Interest Income……………………………………………………….
Others - net…………………………………………………………….
Provision for Income Tax……………………………………………
Net Income After Tax (NIAT)………………………………………..
Core Net Income 2 …………………………………………………….
65,548
62,555
50,503
2,816
3,488
5,748
2,993
32,009
4,239
27,770
33,539
54%
18,086
15,453
25%
(2,068)
219
434
(4,293)
9,745
9,075
63,861
62,443
53,321
2,795
3,038
3,289
1,418
27,399
2,948
24,451
36,462
58%
17,388
19,074
31%
(2,183)
272
810
(5,404)
12,569
12,003
3%
-5%
1%
15%
75%
111%
17%
44%
14%
-8%
4%
-19%
-5%
-19%
-46%
-21%
-22%
-24%
1
2010 mobile service revenues include a one-time upward adjustment amounting to P526 million representing prepaid
load credits that have either expired or have already been used up.
2
Core net income is net income after tax (NIAT) but excluding foreign exchange and mark-to-market gains (losses), and
non-recurring items.
•
Consolidated service revenues in 2010 of P62.6 billion were higher by P112 million from
previous year’s P62.4 billion. Mobile revenues were down 5% with declining yields coming
from the unlimited and bucket offerings, and price pressures resulting from intense
competition. The fixed line and broadband businesses, on the other hand, rose 32% year-onyear with sustained demand from the corporate sector and the 50% expansion of broadband
subscriber base from a year ago. As a result, revenue mix shifted with the mobile business
comprising 81% of total service revenues from 85% in 2009, and the fixed line and broadband
segment accounting for 19% of the total from 15% in 2009.
•
This year’s results include the impact of the one-time upward adjustment of P526 million,
which represents prepaid load credits that have either expired or have already been used up.
Excluding this upward adjustment, consolidated service revenues would have closed the year
at P62.0 billion, just slightly below last year’s level of P62.4 billion.
SEC Form 17A 2010
37
•
Operating expenses and subsidy increased by 12% from a year ago, from P26.0 billion to
P29.0 billion, driven largely by higher network costs, marketing, outsourced services, and
receivable-related provisions. Network-related charges such as electricity, fuel, repairs and
maintenance grew as a result of an expanded 2G, 3G and broadband network. These were
offset by lower rent resulting from the termination of temporary cable leases following the
completion of FOBN2, the Company’s 2nd fiber optic backbone network. Subsidy and
marketing expenses also rose by 4% compared to 2009. As a percentage of service
revenues, marketing and subsidy was at 9% from 8% in 2009. Finally, operating costs in
2009 included reversals arising from the settlement of previously provisioned receivables, and
other one-time adjustments. Excluding these one-time adjustments, 2010 normalized
operating expenses and subsidy would have grown by a smaller 9% compared to the
reported 12%.
•
With the increase in operating expenses outpacing the growth in service revenues,
consolidated EBITDA was down 8% from P36.5 billion to P33.5 billion in 2010. While mobile
EBITDA margin remained healthy at 63% of service revenues, the higher contribution of the
fast-growing but lower-margin fixed line and broadband business diluted consolidated
EBITDA margin to 54% from 58% in 2009. Depreciation charges, on the other hand, grew
4% driven by investments in the broadband and mobile networks.
•
The Company closed the year with net income after tax of P9.7 billion, 22% lower than
previous period’s P12.6 billion. Net income for 2010 included the P526 million one-time
(before-tax) adjustment from prepaid load credits that have either expired or have been used
up, while 2009 net income included a one-time after-tax gain of about P398 million from an
equipment exchange transaction with an equipment supplier. Excluding foreign exchange,
mark-to-market gains and losses, as well as non-recurring items, core net income stood at
P9.1 billion, down 24% from past year’s P12.0 billion.
•
Total capital expenditures for the year amounted to P19.5 billion (or about US$431 million)
driven by the sustained expansion and upgrade of the Company’s broadband and mobile
networks. This is 21% lower than year ago spending of P24.7 billion which included a onetime spend in the Company’s domestic backbone network FOBN2, a second international
cable landing station in North Luzon, and the related investment in the TGN-Intra Asia
submarine cable system. As a result, total capital expenditures as a percentage of service
revenues dropped from 40% a year ago to 31% in 2010. At the end of the year, Globe has a
total of 11,660 base stations and 6,698 cell sites to support its 2G, 3G and WiMAX services.
•
For 2011, Globe is allocating about US$500 million in capital expenditures. This includes
about US$69 million of carryover spending from 2010. Of the US$500 million earmarked for
the year, around US$185 million is allocated for the broadband business, while another
US$160 million is allotted for the mobile telephony business to expand capacities, modernize
equipment, and improve network quality. This year’s capex also includes US$37 million to
support the continued growth of Globe’s corporate data business, as well as US$28 million to
strengthen Globe’s backend systems and delivery platforms. Finally, 2011 capex includes
about US$90 million in spend for international cable facilities and other one-time investments,
including the construction of a new corporate office that will consolidate Globe’s current
offices in Metro Manila into one location.
•
Regular cash dividends paid out in 2010 amounted to P10.6 billion, representing 84% of 2009
net income. This is in line with the Company’s dividend policy of distributing 75% to 90% of
prior year’s net income. Total dividend payout of P80 per share translates to a dividend yield
of 9% based on beginning of 2010 share prices.
•
For 2011, competition in the mobile telephony business is expected to further intensify, with
unlimited and bucket service pricing continuing to impact yields and margins and with the
likely entry of new operators. The broadband industry, on the other hand, is expected to grow
but at a slower rate. The Company’s priorities will continue to revolve around differentiated
customer service, improved network quality experience for its subscribers, and unique
product offers. Globe will focus on creating the preferred brand for cellphone internet in the
country. For broadband, meanwhile, the Company aims to improve profitability through
SEC Form 17A 2010
38
improved scale, more cross-selling, lower churn through an improved network, and lower
costs through process reengineering and better operating models. For the corporate data
business, Globe aims to sustain the double-digit growth through customized, value-adding
solutions, competitive pricing, and continued engagement with enterprise partners across the
country. In addition to the large corporations, the Company will focus as well on small and
medium-scale enterprises by providing them with affordable tools and solutions to help them
run their business more efficiently.
SEC Form 17A 2010
39
GROUP OPERATING REVENUES BY SEGMENT
For the Year Ended
Operating Revenues By Businesses (Php Mn)
31-Dec
31-Dec
YoY
2010
2009
Change
(%)
Mobile
Service Revenues *……………………………………………….
Non-Service Revenues……………………………………………
52,877
50,503
2,374
54,237
53,321
916
-3%
-5%
159%
Fixed Line and Broadband
Service Revenues…………………………………………………
Non-Service Revenues……………………………………………
Total Net Operating Revenues…………………………………
12,671
12,052
619
65,548
9,624
9,122
502
63,861
32%
32%
23%
3%
* 2010 mobile service revenues include a one-time upward adjustment amounting to P526 million representing
prepaid load credits that have either expired or have already been used up.
The Globe Group ended the year with total net operating revenues of P65.5 billion, 3% above
prior year’s P63.9 billion.
The mobile business comprised 81% of consolidated service revenues in 2010 compared to 85%
in the earlier period. Mobile revenues were affected by continued multi-SIM usage, subscriber
preference for value offers, and price pressures resulting from intense competition. Despite an
overall growth in voice and SMS traffic, revenues were weighed down by the lower-yield bucket
and unlimited service offerings. As a result, the mobile business closed the year with service
revenues of P50.5 billion, 5% below 2009 level of P53.3 billion.
Mobile subscriber growth remained strong. The business achieved a milestone in 2010 when its
mobile postpaid subscribers hit the 1 million mark. The innovative My Super Plan and My Fully
Loaded Plan fueled the expansion in subscriber base coupled with new subscriptions to Apple™
iPhone 4. Similarly, prepaid subscribers also rose to end 2010 at 25.4 million SIMs, up 13% from
2009.
The fixed line and broadband business, meanwhile, accounted for the remaining 19% of
consolidated service revenues for the year, higher than last year’s 15%. The broadband business
similarly accomplished a milestone when its subscribers reached 1 million towards the third
quarter of 2010. The expansion in client base coupled with the introduction of new services that
enable faster browsing speeds drove the broadband business to post record revenues of P5.7
billion during the year, up 75% compared to 2009. The fixed line data business also posted
strong growth given strong demand from the corporate sector, including the offshoring and
outsourcing industry.
Consolidated non-service revenues, on the other hand, more than doubled from last year’s level
of P1.4 billion to P3.0 billion driven largely by higher handset sales from the mobile business,
which posted record high acquisitions in the postpaid segment, as well as brisk sales of Globe
Broadband Tattoo.
SEC Form 17A 2010
40
MOBILE BUSINESS
For the Year Ended
Mobile Net Service Revenues (Php Mn)
31-Dec
31-Dec
YoY
2010
2009
Change
(%)
Service
Voice1 ….…………………………………………………………...
Data 2..………………………………………………………………
Mobile Net Service Revenues *…………………………………..
25,971
24,532
50,503
26,497
26,824
53,321
-2%
-9%
-5%
* 2010 mobile service revenues include a one-time upward adjustment amounting to P526 million representing
prepaid load credits that have either expired or have already been used up.
1
Mobile voice net service revenues include the following:
a) Prorated monthly service fees on consumable minutes of postpaid plans;
b) Subscription fees on unlimited and bucket voice promotions including the expiration of the unused value of
denomination loaded;
c) 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; and
d) 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 load credit denomination (for Globe Prepaid and TM
SIMs) 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 load credit discounts; and revenues generated from
inbound international and national long distance calls and international roaming calls.
Revenues from (a) to (d) are reduced by any interconnection or settlement payouts to international and local
carriers and content providers.
2
Mobile data net service revenues consist of prorated monthly service fees on free text allocation of postpaid
plans, revenues from value-added services such as inbound and outbound SMS and MMS, content
downloading, mobile data browsing and infotext, international VAS and related services, subscription fees on
unlimited and bucket prepaid SMS and add-on VAS services, net of any interconnection or settlement
payouts to international and local carriers and content providers.
Mobile Voice
Mobile voice revenues accounted for 51% of total mobile service revenues in 2010 and closed at
P26.0 billion, down 2% from previous year. Revenues from unlimited and bulk voice
subscriptions as well as roaming services were significantly higher than in 2009. These gains,
however, were not enough to fully compensate for the decline in regular voice and IDD services.
During the year, Globe sustained its breakthrough voice offerings, led by the pioneering persecond charging and its bulk and unlimited voice services. Sakto Calls, Tawag 236 for P20 for
20-minute intra-network calls, and Globe Prepaid’s P10 for a 3-minute call have remained market
favorites on top of the regular voice packages. Globe likewise sustained its unlimited voice
service SuperUnli which is available for as low as P25 a day, and the innovative 2-in-1 mobile and
landline service Duo and SuperDuo.
For TM, the Company similarly continued to offer its bucket voice call promotions such as
AstigTawag20 for consumable 15-minute calls to all networks for P20, TodoTawag P15 for 15minute intra-network calls, and TM SuliTawag for a 3-minute intra-network call for only P15. For
heavy and yet value-conscious users, on the other hand, TM has its unlimited voice services TM
UNLICOMBO for unlimited intra-network calls from 10 PM to 5 PM the following day coupled with
unlimited SMS for 24 hours, and TodoTawag Magdamag for unlimited calls during off-peak hours
from 11PM to 6 AM the following day for only P15.
For Filipinos who wish to stay connected with their loved ones abroad, Globe continued to offer its
pioneering IDD Sakto Calls and Super Sulit Tipid IDD services. Globe similarly expanded its allyou-can offerings to include international voice calls with its SuperIDD offering which supports
unlimited IDD service to US and Canada from 11:00 PM to 5:59 AM (Philippine Time) for only
SEC Form 17A 2010
41
P99 a day. Globe also introduced IDD Tingi, a bucket IDD service to popular and selected
overseas destinations, while continuing to offer its TipIDD card at various Globe distribution
channels.
Mobile Data
Mobile data revenues accounted for 49% of total mobile service revenues, and decreased by 9%
from P26.8 billion in 2009 to P24.5 billion in 2010. Revenues from mobile browsing nearly
doubled year-on-year given the popularity of social networking sites, affordable pricing of mobile
data plans, and the prevalence of smartphones and access devices available in the market.
Revenue gains from this segment, however, were unable to fully cover the decline in regular SMS
revenues which remained to be affected by the lower-yield bucket and all-you-can text service
offerings.
During the year, the Company continued to offer its popular all-you-can text services such as
Globe’s UnliTxt, SuperUnli Txt and SuperTxt alongside TM’s AstigTxt10 and Todo Text 10 in
Mindanao. Globe also sustained its bucket SMS promotions SuliTxt, TxtOthers, EverybodyTx.t,
and SuperAll Txt coupled with TM’s AstigTxtAll and SuliTxt. The Company also launched
“combo” products such as Globe’s Super One for unlimited calls and text to a frequently called
Globe or TM number, and TM’s All Net Combo which provides 100 text messages plus 10
minutes of calls to all networks.
For its mobile internet services, Globe maintained its affordable add-on data plan Super Surf
which allows unlimited chatting, downloading, emailing and browsing for Globe Postpaid and
Globe Prepaid subscribers. Further, to encourage even more customers to try surfing the internet
using their mobile phones, Globe reduced the fee for its 30-day subscription to Super Surf for
both Globe Postpaid and Blackberry® subscribers from P1,200 to P999. The service is also
available for a 5-day subscription for only P220, and for as low as P50 a day for Globe Prepaid
subscribers. The Company similarly launched Power Surf which allows its Globe Prepaid
subscribers to purchase mobile internet hours by bulk in either of the two denominations: 3 hours
for P30 valid for a day, or 5 hours for P50 valid for 3 days.
For BlackBerry® users, Globe sustained its attractive and affordable data services such as the
following: unlimited BlackBerry® service for Globe Prepaid subscribers, Super Surf for
BlackBerry® which provides unlimited usage of the BlackBerry® APN for chatting, downloading,
emailing via push email service and mobile surfing for Globe Postpaid subscribers, and Super
Surf for BlackBerry® Max which provides unlimited use of both mobile internet service and
BlackBerry® APN for its Globe Postpaid subscribers.
SEC Form 17A 2010
42
The key drivers for the mobile business are set out in the table below:
For the Year Ended
31-Dec
2010
31-Dec
YoY
2009
Change
(%)
Cumulative Subscribers (or SIMs) Net (End of period)………..
1
Globe Postpaid ……………………………………………………….
26,470,859
1,066,137
23,245,006
851,368
14%
25%
Prepaid .………………………………………………………………...
Globe Prepaid ………………………………………………………
TM ……………………………………………………………………
25,404,722
13,834,716
11,570,006
22,393,638
13,048,861
9,344,777
13%
6%
24%
Net Subscriber (or SIM) Additions………………………………...
Globe Postpaid . ……………………………………………………….
3,225,853
214,769
(1,401,594)
55,673
330%
286%
Prepaid .………………………………………………………………...
Globe Prepaid ………………………………………………………
TM ……………………………………………………………………
3,011,084
785,855
2,225,229
(1,457,267)
(244,371)
(1,212,896)
307%
422%
283%
Gross ARPU
Globe Postpaid . ……………………………………………………….
1,609
1,822
-12%
Prepaid
Globe Prepaid ……………………………………………………….
TM ……………………………………………………………………
206
121
241
124
-15%
-2%
Net ARPU
Globe Postpaid…...…………………………………………………….
1,192
1,283
-7%
156
92
182
98
-14%
-6%
3,489
5,382
-35%
-21%
Average Revenue Per Subscriber (ARPU)
Prepaid
Globe Prepaid ……………………………………………………….
TM….………………………………………………………………….
Subscriber Acquisition Cost (SAC)
Globe Postpaid………………………………………………………....
Prepaid
Globe Prepaid ……………………………………………………….
TM ……………………………………………………………………
Average Monthly Churn Rate (%)
Globe Postpaid . ……………………………………………………..
37
27
37
34
1.92%
1.95%
Prepaid
Globe Prepaid ……………………………………………………….
TM ……………………………………………………………………
6.23%
6.62%
6.75%
8.35%
1
As of 4Q 2010, Globe had a total of 1.33 million wireless postpaid subscribers which includes 1.07 million mobile
telephony and 0.26 million wireless broadband customers. This is higher compared to the 1.22 million wireless
postpaid subscribers as of 3Q 2010 which is comprised of 0.98 million mobile telephony subscribers and 0.24 million
wireless broadband customers. Mobile telephony revenues are reflected under “Mobile Service Revenues” while
wireless broadband revenues are included under “Broadband.”
Globe closed the year with a total mobile SIM base of 26.5 million, 14% higher than previous
year’s 23.2 million. Gross additions in the fourth quarter was sustained at 5.6 million, bringing full
year gross acquisitions to 21.8 million, 12% better than year ago level of 19.4 million. With churn
rates improving across all brands, net subscriber additions once again breached the 1 million
SEC Form 17A 2010
43
mark in the fourth quarter, the highest quarterly output since 2Q08. This brought full year
incremental subscribers to 3.2 million compared to a net reduction of 1.4 million in 2009.
The succeeding sections cover the key segments and brands of the mobile business – Globe
Postpaid, Globe Prepaid and TM.
Globe Postpaid
The postpaid segment accounted for 4% of the total mobile subscriber base in 2010. During the
period, Globe postpaid delivered record-breaking performances in key metrics. Gross additions
in the fourth quarter alone soared to 115,399, bringing full year gross acquisitions to an all-time
high of 412,894. With churn rates improving year-on-year from 1.95% to 1.92%, net additions
likewise surged to a record high of 214,769 in 2010. As a result, cumulative postpaid subscribers
stood at 1,066,137 as of end 2010, 25% higher than previous year’s level of 851,368 subscribers.
The innovative My Super Plan and My Fully Loaded Plan, which allow subscribers to customize
their plans, have been a major growth driver in this segment, enabling the Company to
accumulate record subscriptions in the second half of the year. Globe also capped the period by
TM
successfully bringing in the Apple iPhone 4 to the Philippine market. To complement these
initiatives and step up its acquisition campaign further, the Company launched new and exciting
promotional deals during the holiday season by offering more handsets and gadget bundles for its
postpaid plans. In the fourth quarter, Globe launched two BlackBerry® plans to meet the
increasing demand for mobile internet service. BlackBerry® Messaging gives subscribers
unlimited push email and instant messaging via BlackBerry® Messenger, Yahoo! Messenger,
AOL Instant Messenger, MSN Messenger, and Google Talk. BlackBerry® Social, on the other
hand, provides unlimited access to popular networking sites such as Facebook, Twitter, and
MySpace, and allows instant messaging as well. Both data plans are priced at P300 each for a
30-day subscription. Towards the end of 2010, the Company introduced Globe Tablet Plans for
customers with tablet devices. Postpaid customers can either access the internet for a
cumulative 50 hours for as low as P499 for 30 days, or surf all they want for only P999 a month.
The Globe SIM for tablet plans supports internet browsing at speeds of up to 2 Mbps.
Postpaid gross and net ARPUs of P1,609 and P1,192 were lower than last year’s P1,822 and
P1,283, respectively. Growth in mobile browsing and roaming revenues were offset by lower
domestic voice and SMS revenues, as well as lower inbound international revenues.
Postpaid SAC (subscriber acquisition costs) decreased by 35% from previous year’s P5,382 to
P3,489 due largely to lower subsidy, advertising and promotion charges. Costs, meanwhile,
remained recoverable within the 24-month contract period for postpaid subscribers.
Prepaid
Globe’s prepaid segment, which includes the Globe Prepaid and TM brands, comprises 96% of
its total subscriber base. As of end 2010, cumulative prepaid subscribers of 25.4 million were
13% above last year’s 22.4 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
SEC Form 17A 2010
44
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.
The succeeding sections discuss the performance of the Globe Prepaid and TM brands in more
detail.
a. Globe Prepaid
Globe Prepaid comprised 52% of the total mobile subscriber base in 2010. During the year, gross
acquisitions increased by 4% from last year’s 10.4 million to 10.8 million SIMs as a result of the
Company’s efforts to revitalize the prepaid brands and following the Company’s recalibration of its
acquisition drives in 2009 and the deliberate churn-out of marginal subscribers. With churn rate
declining year-on-year from 6.75% to 6.23%, net incremental subscribers for 2010 were 785,855,
reversing last year’s net reduction of 244,371. As a result, cumulative Globe Prepaid subscribers
rose 6% from last year’s 13.0 million to 13.8 million SIMs in 2010.
Globe continued to lead the market in innovation. Towards end of the year, the Company
launched another first-in-the-market offering, SuperFree Weekends, which is a load accumulator
program that rewards Globe Prepaid subscribers with 200 SMS to all networks and one hour of
mobile internet service during weekends upon accumulation of a total of P199 worth of load from
Monday to Friday. Load amount may be in any denomination and may be purchased from
Globe’s various reloading channels such as, AutoloadMax, call cards, via partner banks and
ATMs, GCash2Load, and via E-pins.
In the fourth quarter of 2010, Globe further intensified its line up of bucket and unlimited service
offerings with the launch of SUPERCOMBO20. The service provides unlimited text and 50
minutes of calls to Globe and TM subscribers for only P20 a day. The growing interest for
internet access driven by the introduction of new and exciting access devices such as tablets and
smartphones, coupled with the popularity of social networking sites, has prompted Globe to
develop more mobile browsing plans. BlackBerry® Messaging and BlackBerry® Social are also
available for Globe Prepaid subscribers at P300 each for 30 days, while the Globe Tablet Plans
may be availed by Globe Prepaid subscribers by subscribing to Super Surf for as low as P50 for 1
day or P220 for 5 days.
Despite an overall growth in voice and SMS traffic, Globe Prepaid gross and net ARPUs fell by
15% and 14%, respectively. The continued shift in usage from regular, pay-per-use to valuebased bucket and unlimited service offerings, alongside price pressures arising from intense
competition, were the key drivers behind the decline. Subscriber acquisition costs, on the other
hand, were maintained at last year’s level of P37 and remained recoverable within a month’s net
ARPU.
b. TM
TM closed the year with 11.6 million subscribers, up 24% from last year’s 9.3 million, and
accounted for 44% of total mobile subscriber base in 2010. Full year gross acquisitions rose 20%
from 8.8 million last year to 10.5 million as the Company concluded its clean-up of lower-quality
subscribers and revitalized its acquisition program. With churn rate substantially improving from
8.35% to 6.62%, net additions increased to over 2.2 million and reversed last year’s net reduction
of about 1.2 million subscribers.
In 2010, TM unveiled an extensive line of bucket and unlimited service offerings to gain a stronger
foothold in the mass market. Still bannered under the “Republika ng TM” campaign, the
Company intensified its acquisition and retention programs through product offerings such as ALL
NET COMBO, ASTIGTXTALL, and TM UNLICOMBO. To further enhance its services, the
Company recently launched a low-denomination bulk voice service TM DAGDAGCALL to allow
subscribers to make 3 consumable minutes of voice calls to any Globe or TM subscriber for only
P5. For SMS services, the Company launched TM DAGDAGTXT which allows subscribers to
send 10 texts to all networks for just P5 for 1 day. Similarly, TM boosted its service offerings with
ASTIGCOMBO10 which allows subscribers to send 50 text messages to all networks plus 10
consumable minutes of voice calls to other Globe and TM subscribers for only P10 a day.
SEC Form 17A 2010
45
ASTIGCOMBO20, on the other hand, provides 24 hours of unlimited SMS plus 100 consumable
minutes of intra-network voice calls for P20 a day.
Similar to trends in Globe Prepaid, TM gross and net ARPUs fell from 2009 levels by 2% and 6%,
respectively. Subscriber acquisition costs, on the other hand, dropped significantly by 21% yearon-year on lower handset and SIM pack subsidies, and remained recoverable within a month’s
net ARPU.
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. Net
registered GCash user base at the end of 2010 totaled 1.0 million.
On October 9, 2009, the Company announced that the Bangko Sentral ng Pilipinas (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). BPI, Globe and AC plan to
transform PSBI into the country’s first mobile microfinance bank. 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. opened its first branch last February 2010. It will initially focus on
wholesale lending to other microfinance institutions, but plans to expand into other retail banking
products and services.
Globe also launched its GCash Remit Service, providing mobile subscribers a quick, affordable
and convenient way to send and receive domestic and international remittances. With BSP’s
recent approval to use its sub-distributors as cash-in and cash-out outlets, GCash now has the
largest remittance network in the country with its 18,000 GCash outlets.
On October 14, 2010, Globe also achieved a milestone with the launch of 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 in their GCash 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.
SEC Form 17A 2010
46
FIXED LINE AND BROADBAND BUSINESS
For the Year Ended
Net Service Revenues (Php Mn)
31-Dec
31-Dec
2010
2009
YoY
Change
(%)
Service
Fixed line Voice 1 ….………………………………………………
Fixed line Data 2……………………………………………………
Broadband 3..………………………………………………………
2,816
3,488
5,748
2,795
3,038
3,289
1%
15%
75%
Fixed Line and Broadband Net Service Revenues……...........
12,052
9,122
32%
1
Fixed line voice net service revenues consist of the following:
a)
b)
c)
d)
e)
f)
Monthly service fees including CERA of voice-only subscriptions;
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.
Revenues from (a) to (c) are net of any interconnection or settlement payments to domestic and international
carriers.
2
Fixed line data net service revenues consist of the following:
a)
b)
c)
d)
3
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.
Broadband net service revenues consist of the following:
a)
b)
c)
d)
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 wireless 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.
SEC Form 17A 2010
47
Fixed Line Voice
Globe Group
For the Year Ended
31-Dec
31-Dec
2010
Cumulative Voice Subscribers – Net (End of period) 1 ………
Average Revenue Per Subscriber (ARPU)
Gross ARPU………………………………………………………..
Net ARPU…………………………………………………………..
Average Monthly Churn Rate ..…………………………………..
1
2009
618,606
589,331
456
383
4.06%
543
476
3.39%
YoY
Change
(%)
5%
-16%
-20%
Includes DUO and SuperDUO subscribers.
Cumulative fixed line voice subscribers grew 5% year-on-year to almost 619,000, driven by higher
subscriptions to the postpaid DUO and SUPERDUO services, as well as to the bundled voice and
broadband plans. This resulted in total fixed line voice revenues amounting to P2.8 billion, 1%
higher than prior year’s level. This 1% increase was in spite of the continued shift in traffic from
fixed line voice to mobile services and the resulting weaker demand for voice-only, fixed line
products.
Fixed Line Data
Globe Group
For the Year Ended
Net Service Revenues (Php Mn)
31-Dec
31-Dec
2010
2009
YoY
Change
(%)
Fixed line Data
International …..……………………………………………………
Domestic …… ……………………………………………………..
Others 1 ……………………………………………………………
1,020
1,587
881
944
1,362
732
8%
17%
20%
Total Fixed line Data Service Revenues………………………..
3,488
3,038
15%
1
Includes revenues from value-added services such as internet, data centers and bundled services.
The fixed line data segment sustained its strong growth and ended 2010 with P3.5 billion in
revenues, an increase of 15% over 2009 level of P3.0 billion following gains across all product
segments. Growth has been fueled by the Company’s continued expansion of its network of
high-speed data nodes, transmission links, and international bandwidth capacity to serve the
requirements of business and enterprise clients, including those in the financial services, retail,
offshoring and outsourcing industries.
To further address the communication needs of corporates, especially those frequently dealing
with business partners overseas, Globe Business recently launched Globe Telepresence, the
Company’s most advanced, close-to-live conferencing solution. Supported by Globe’s reliable
Multi-Protocol Label Switching (MPLS) for Virtual Private Network (VPN) transport, Globe
Telepresence enables customers to conduct highly-immersive virtual meetings, supported by lifesize, high-definition images, and smooth, realistic, real-time motion and spatial audio. Globe
Telepresence connects to other telepresence rooms on the AT&T Business Exchange, giving
customers access to over 70 countries and territories, helping them save on travel time and costs.
Globe Business also develops reliable and cost-effective solutions for the country’s thriving small
and medium-sized enterprises (SME). Early in 2010, the Company launched Globe Negostar
Fair, a series of road shows and trade events that introduce Globe Business’ products, solutions,
and offers to the SMEs in that area. To date, Globe Business has conducted Negostar events in
20 key business centers in the country including Batangas, Angeles, Baguio, and Davao.
SEC Form 17A 2010
48
Broadband
For the Year Ended
Cumulative Broadband Subscribers
Wireless 1 …………………………………………………………....
Wired………………………………………………………………….
Total (end of period)…………………………………………………
1
31-Dec
31-Dec
2010
2009
819,276
255,077
1,074,353
YoY
Change
(%)
499,383
216,089
715,472
64%
18%
50%
Includes fixed wireless and fully mobile broadband subscribers.
In 2010, Globe’s broadband business achieved a major milestone when its cumulative subscriber
base breached the 1 million mark, ending the year with over 1,074,000 subscribers, 50% higher
than the prior year’s level of 715,000. This was driven by the continued gains of Globe Broadband
Tattoo, the Company’s nomadic broadband service, and Globe WiMAX, Globe’s fixed wireless
service for at-home use. Globe WiMAX, which reached 100,000 subscribers in July 2010, is the
country’s biggest and fastest-growing WiMAX service and is available in over 420 towns and
cities, in over 60 provinces nationwide. Wireless broadband subscribers now account for 76% of
total broadband customers, up from 70% last year.
The robust subscriber pick-up translated to sustained revenue gains, with broadband service
revenues up 75% to close the year at P5.7 billion compared to P3.3 billion in 2009. The
broadband business now comprises 9% of consolidated service revenues compared to 5% in
2009.
In an effort to sustain the strong growth in the segment, Globe expanded its WiMAX offerings by
introducing a prepaid variant in July 2010. Globe WiMAX Prepaid 4G is available in data-only
prepaid kits at speeds of up to 3mbps for only P60 per day (plus one-time modem charge). Each
prepaid kit comes preloaded with P60 and can be topped-up through the following reload
channels: AMAX, Share-a-load, GCash, and ATMs. Globe also released Immortal Surf, the first
and only mobile internet offer that gives consumable internet surfing minutes without expiry. For
only P20, Immortal Surf provides subscribers with one hour of internet surfing minutes that will not
expire as long as the subscriber maintains a P5 maintaining balance.
In the last quarter of 2010, Globe also made its Globe Tattoo MyFi Device more affordable by
dropping prices of its prepaid kit from P7,000 to P4,995. Globe Tattoo MyFi is a wireless modem
and Wi-Fi router that enables one to share internet access with other Wi-Fi-capable devices
simultaneously. Meanwhile, for Globe Tattoo Plan499 and Plan999 subscribers, the price of the
MyFi device was also reduced from a monthly fee of P250 to P149 for 24 months. Following the
price drop of Globe Tattoo MyFi, Globe launched the Tattoo SuperStick, Globe Tattoo’s most
powerful mobile broadband, capable of speeds of up to 3 mbps, and with sharable Globepowered WIFI connection for only P1,299 per month. It also comes with one month of free
McAfee Antivirus Plus and 200 free SMS to Globe and TM subscribers every month.
SEC Form 17A 2010
49
OTHER GLOBE GROUP REVENUES
International Long Distance (ILD) Services
Globe Group
For the Year Ended
Total ILD Revenues (Php Mn) ……………………………………...
12,794
14,317
YoY
Change
(%)
-11%
Average Exchange rates for the period (Php to US$1)……………
45.314
47.777
-5%
Total ILD Minutes (in million minutes) 1………………………….
Inbound……………………………………………………………….
Outbound.…………………………………………………………….
ILD Inbound / Outbound Ratio (x) ………………………………...
2,349
1,968
381
5.17
2,388
2,019
369
5.47
-2%
-3%
3%
ILD Revenues and Minutes
1
31-Dec
31-Dec
2010
2009
ILD minutes originating from or terminating to Globe and Innove networks.
Both Globe and Innove offer ILD voice services which cover international call services between
the Philippines and more than 200 destinations with over 600 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 declined
by 11% from P14,317 million last year to P12,794 million. This is mainly due to a 2% decline in
total ILD traffic with the 3% decline in the higher-volume inbound traffic offsetting the 3% growth
in outbound traffic. In addition to the lower traffic, the stronger peso has also negatively impacted
ILD revenues.
The Company sustained its promotion of OFW SIM packs and its discounted call rate offers
through such services as IDD Sakto Call (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 the first
quarter of the year, Globe launched its SuperIDD promo, the first and only Unlimited Off-Peak
IDD offer for calls to the US and Canada (11:00pm to 5:59am Philippine Time) for only P99/day
and P1,999 for 30 days. The Company also added My SuperIDD to the roster of all-you-can
services available in MY SUPERPLAN. Subscribers can now also enjoy the service and will
simply be charged P1,999 a month, on top of all other all-you-can subscriptions.
Interconnection
Domestically, the Globe Group pays interconnection access charges to other carriers for calls
originating from its network terminating to other carriers’ networks, and hauling charges for calls
that pass through Globe’s network terminating in another network.
Internationally, the Globe Group also incurs payouts for outbound international calls which are
based on a negotiated price per minute, and collects termination fees from foreign carriers for
calls terminating in its network. The Globe Group also collects interconnection access charges
from local carriers whose calls and SMS terminate in Globe Group’s network.
SEC Form 17A 2010
50
GROUP OPERATING EXPENSES
In 2010, the Globe Group’s total costs and expenses, including depreciation, increased by 9%
year on year to P
= 47,102 million from P
= 43,369 million in 2009, driven mainly by higher networkrelated expenses with the expansion and upgrading of the Company’s mobile, broadband and
corporate data networks, as well as higher outsourced services related to the growth in its
subscriber base.
Costs and Expenses (Php Mn)
Globe Group
For the Year Ended
31-Dec
31-Dec
Cost of sales…………………………………………………………….
Non-service revenues………………………………………………….
Subsidy………………………………………………………………….
4,239
2,993
1,246
2,948
1,418
1,530
YoY
Change
(%)
44%
111%
-19%
Selling, Advertising and Promotions ………………………………..
Staff Costs ………………………………………………………………
Utilities, Supplies & Other Administrative Expenses………………..
Rent………………………………………………………………………
Repairs and Maintenance……………………………………………..
Provisions ………………… …………………………………………………
Services and Others…………………………………………………...
Operating Expenses………………………………………………….
4,269
5,089
3,339
2,809
3,273
1,466
7,525
27,770
3,766
4,981
2,693
3,469
2,582
725
6,235
24,451
13%
2%
24%
-19%
27%
102%
21%
14%
Depreciation and Amortization ……………….…………………....
Total Costs and Expenses…………………………………………..
18,086
47,102
17,388
43,369
4%
9%
2010
2009
Subsidy and Marketing
Total subsidy decreased by 19% year on year to P1,246 million from P1,530 million in 2009.
While subscriber gross additions for both mobile and broadband were higher compared to 2009,
lower mobile handset and broadband CPE subsidies pulled down total costs. Meanwhile, selling,
advertising, and promotions of P4,269 million were higher by 13% compared to 2009 as the
Company executed on its thrusts to grow its broadband subscriber base, sustain the growth of
Globe Postpaid, while revitalizing its mobile prepaid brands.
Total subsidy, selling, advertising and promotions of P5,515 million represent 19% of total
operating expenses and subsidy. As a percentage of revenues, total subsidy, selling, advertising
and promotions reached 9% in 2010, compared to 8% last year.
Staff Costs
Staff costs, which accounted for 18% of total operating expenses, increased by 2% year-on-year
from P4,981 million to P5,089 million, mainly driven by higher pension costs during the period.
Total headcount increased by 4% year on year to 5,667 from 5,451 by the end of 2009.
Rent
Rent expense which accounted for 10% of the total operating expenses posted a favorable 19%
year-on-year decrease due to the termination of certain leases for temporary capacity protection
with the completion in November 2009 of FOBN2, Globe’s second fiber optic backbone.
Provisions
This account includes provisions related to trade, non-trade and traffic receivables and inventory.
Overall, provisions posted a net increase of 102% year on year or P741 million as the Company
implemented a more stringent provisioning policy for its fixed line receivables. Provisions for
2009 is also net of an upside adjustment arising from the settlement of previously provisioned
SEC Form 17A 2010
51
receivables. As a percentage of service revenues, provisions was at 2% compared to 1% in
2009.
Services and Others
Services and Others, which accounted for 27% of total operating expenses, increased by 21% or
P1,290 million from P6,235 million in 2009 to P7,525 million in 2010, mainly on higher charges
related to various outsourced functions such as call centers, technical helpdesk, subscriber line
installation services, as well as other services related to the Company’s expanded mobile and
broadband network and subscriber base.
Depreciation and Amortization
Depreciation and amortization expenses increased by 4% year on year or P698 million to
P18,086 million in 2010 from P17,388 million in 2009 due to additional investments resulting from
the continued expansion of the Company’s broadband and mobile networks.
SEC Form 17A 2010
52
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
For the Year Ended
Non-operating Income / Expense (Php Mn)
Financing Costs – net
Interest Expense…………………………………………………...
Loss on derivative instruments – net…………………………….
Swap costs and other financing costs…………………………...
31-Dec
31-Dec
2010
2009
YoY
Change
(%)
(1,982)
(28)
(58)
(2,068)
(2,097)
(47)
(39)
(2,183)
-5%
-40%
49%
-5%
Foreign Exchange Gain – net……………………………………..
Interest Income ……………………………………………………..
Others – net………………………………………………………….
465
219
(31)
287
272
523
62%
-19%
-106%
Total Other Expenses………………………………………………
(1,415)
(1,101)
29%
As of end 2010, the Globe Group’s non-operating charges increased by 29% from P1,101 million
in 2009 to P1,415 million in 2010. Charges for 2009 included a gain, reported under “Others-net,”
from an exchange transaction undertaken by Globe with one of its equipment suppliers to convey
and transfer ownership of existing telecommunications equipment in exchange for a more
advanced system. This resulted to an after-tax gain amounting to P398 million, equivalent to the
difference between the value of the new system and carrying amount of the old equipment.
With the Philippine peso registering a 6% appreciation from January to December 2010, the
Company recorded higher net foreign exchange gains of P465 million in contrast to the P287
million net gains booked last year when the peso strengthened by 3% against the US dollar. (See
related discussion on derivative instruments and swap costs in the Foreign Exchange and Interest
Rate Exposure section).
Meanwhile, interest expense decreased by 5% from P2,097 million last year to P1,982 million on
lower borrowings during the period coupled with the decline in average local and foreign interest
rates. Interest income likewise decreased by 19% from P272 million to P219 million on lower
short-term and held-to-maturity investments coupled with the declining peso and US$ interest
rates.
SEC Form 17A 2010
53
Liquidity and Capital Resources
Globe Group
31-Dec
2010
31-Dec
YoY
2009
Change
(%)
Balance Sheet Data (Php Mn)
Total Assets ……………………………………………………….
Total Debt ………………………………………………………….
Total Stockholders’ Equity ……………………………………….
130,628
50,371
46,869
127,644
47,477
47,709
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) ...…………………..
1.50
2.29
10.91
1.07
0.95
0.52
0.32
1.30
2.08
11.89
1.00
0.87
0.50
0.28
2%
6%
-2%
Globe’s balance sheet and cash flows remain strong with ample liquidity and gearing within
optimum level.
Globe Group’s consolidated assets as of 2010 amounted to P
= 130,628 million compared to
P
= 127,644 million in 2009. Consolidated cash, cash equivalents and short term investments
(including investments in assets available for sale and held to maturity investments) was at
P5,869 million at the end of the period compared to P5,943 million in 2009.
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
year with gross debt to equity ratio of 1.07:1 on a consolidated basis which is well within the 2:1
debt to equity limit dictated by its debt covenants. Meanwhile, net debt to equity ratio was at
0.95:1 compared to 0.87:1 for the same period last year.
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 December 2010, Globe is well within the ratios prescribed under its loan agreements.
1
2
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.
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 December 2010.
SEC Form 17A 2010
54
Consolidated Net Cash Flows
Globe Group
Net Cash from Operating Activities………………………………
27,148
33,376
YoY
change
(%)
-19%
Net Cash from Investing Activities……………………………….
(16,929)
(21,829)
-22%
Net Cash from Financing Activities………………………………
(10,172)
(11,344)
-10%
(Php Mn)
31-Dec
31-Dec
2010
2009
Net cash provided by operating activities decreased by 19% year-on-year from P33,376 million in
2009 to P27,148 million in 2010 on lower cash flows generated from operations.
Meanwhile, net cash used in investing activities amounted to P16,929 million, 22% below 2009
level of P21,829 million driven by lower capital expenditures. Full year 2010 consolidated capital
expenditures declined by 21% from P24,702 million in 2009 to P19,467 million in 2010. Last
year’s amount included a one-time spend in the Company’s domestic backbone network FOBN2
and the related investment in the TGN-Intra Asia submarine cable system.
Globe Group
Capital Expenditures (Cash) ………………………………………..
Increase (decrease) in Liabilities related to Acquisition of PPE…
18,813
654
22,057
2,645
YoY
change
(%)
-15%
-75%
Total Capital Expenditures1 ………………………………………
19,467
24,702
-21%
Total Capital Expenditures / Service Revenues (%)……………...
31%
40%
(Php Mn)
1
31-Dec
31-Dec
2010
2009
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.
For 2011, Globe has earmarked about US$500 million in capital expenditures. This includes
about US$69 million of carryover spending from 2010. Of the US$500 million earmarked for the
year, around US$185 million is allocated for the broadband business, while another US$160
million is allotted for the mobile telephony business to expand capacities, modernize equipment,
and improve network quality. Capex for 2011 also includes US$37 million to support the
continued growth of Globe’s corporate data business as well as US$28 million to strengthen the
Company’s backend systems and delivery platforms. Finally, 2011 capex also includes about
US$90 million in spend for international cable facilities and other one-time investments, including
the construction of a new corporate office that will consolidate Globe’s current offices in Metro
Manila into one location. The Company will finance its capital requirements for the year with
internally-generated funds and additional borrowings.
Consolidated net cash used in financing decreased by 10% to P10,172 million in 2010 on lower
cash dividends paid out during the year. Consolidated total debt increased by 6% from P47,477
million to P50,371 million in 2010. Loan repayments of Globe for the period amounted to P11,987
million, a 14% decrease compared to the P13,822 million paid in 2009.
Out of the total debt of US$1,156 million, 15% is denominated in US$ out of which 1% has been
hedged to pesos. As a result, the amount of US$ debt swapped into pesos and pesodenominated debt account for approximately 86% of consolidated loans as of the end of 2010.
SEC Form 17A 2010
55
Below is the schedule of debt maturities for Globe for the years stated below based on total
outstanding debt as of 31 December 2010:
Year Due
Principal *
(US$ Mn)
2011 ……………………………………………………………………………………………………
2012…………………………………………………………………………………………………….
2013…………………………………………………………………………………………………….
2014 ……………………………………………………………………………………………………
2015 through 2016……………………………………………………………………………………
Total……………………………………………………………………………………………………
199
283
223
223
228
1,156
* Principal amount before debt issuance costs.
In November 2010, Globe Telecom, Inc. signed a five-year, P4.0 billion term loan facility with
Metropolitan Bank and Trust Company (Metrobank) to prepay part of its existing debts and fund
part of the Company’s capital expenditures for 2011. The Metrobank loan was the third loan
facility signed by Globe during the period. In February 2010, Globe inked a P2.0 billion loan with
Allied Banking Corp., while in September, the Company closed a five-year, P5.0 billion term loan
facility with the Development Bank of the Philippines.
In February 2011, Globe Telecom, Inc. signed a seven-year, P7.0 billion term loan facility with
BDO Unibank, Inc. as lender to fund part of this year’s capital expenditures and prepay existing
debts. This is the Company’s first loan facility for 2011.
Stockholders’ equity as of end of 2010 stood at P46,869 million, 2% below the P47,709 million
level in 2009.
As of 31 December 2010, Globe’s capital stock consists of:
Preferred Shares
Preferred stock Series “A” 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 “Series A” has the following features:
a. Convertible to one common share after 10 years from issue date on June 29, 2001 at not
less than the prevailing market price of the common stock less the par value of the
preferred shares;
b. Cumulative and non-participating;
c. Floating rate dividend;
d. Issued at P5 par;
e. With voting rights;
f. Globe has the right to redeem the preferred shares at par plus accrued dividends at any
time after 5 years from date of issuance; and
g. Preferences as to dividend in the event of liquidation.
The dividends for preferred shares are declared upon the sole discretion of the Board of Directors
(BOD) of Globe Telecom. As of December 31, 2010, the Globe Group has dividends in arrears to
its preferred stockholders amounting to P45.40 million.
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.
SEC Form 17A 2010
56
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
semi-annually 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 February 8, 2011, the Board of Directors approved the declaration of the first semi-annual
cash dividend of P
= 31.00 per common share, payable to shareholders on record as of February
22, 2011. Total dividends of P
= 4.1 billion will be paid on March 18, 2011.
Consolidated Return on Average Equity (ROE) was at 21% in 2010 compared to 26% in 2009
using net income and based on average equity balances for the year ended.
Accordingly, consolidated basic earnings per common share were P73.63 and P94.59, while
consolidated diluted earnings per common share were P73.12 and P94.31 for the years ended 31
December 2010 and 2009, respectively.
SEC Form 17A 2010
57
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 were at 27% and 29% of total service revenues for the periods ended 31
December 2010 and 2009, respectively. In contrast, Globe’s foreign-currency linked expenses
were 10% and 11% out 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
2010
P17.0 billion
P2.7 billion
P0.2 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$35 million of contracts remain outstanding as of the end of December 2010. The
MTM of the outstanding forwards stood at a loss of P2 million as of end December 2010.
Realized gains from forward contracts that matured in 2010 amounted to P76 million.
Translation Exposures
Globe also has US$ assets and liabilities which are revalued at market rates every period. These
are as follows:
US$ Assets
US$ Liabilities
Net US$ Liability Position
December 2010
US$100 million
US$368 million
US$268 million
For accounting purposes, the foreign currency assets and liabilities are revalued at the current
exchange rate at the end of each reporting period. Given the net US$ liability position, an
appreciation of the peso results in a revaluation or forex gain in our P&L. As of December 2010,
the Philippine Peso stood at P43.811 to the US dollar, a 6% appreciation versus the 2009 yearend rate of P46.425. Due to the strengthening of the Peso, the Globe Group charged a total of
P465 million in net foreign exchange gains to current operations for the year ended December
2010.
Prior to 2004, the Company entered into long term currency swap agreements to hedge the
currency exposure on its liabilities. As of end-December 2010, the Company has only one such
remaining agreement, with a notional amount of US$2.5 million. The MTM of this swap contract
stood at a loss of P36 million as of end December 2010.
1
Includes the following revenues:
(1) billed in foreign currency and settled in foreign currency, and
(2) billed in Pesos at rates linked to a foreign currency tariff and settled in Pesos
SEC Form 17A 2010
58
INTEREST RATE EXPOSURE
Interest rate exposures are managed via targeted levels of fixed versus floating rate debt that are
meant to achieve a balance between cost and volatility. Globe’s policy is to maintain between 4488% of its peso debt in fixed rate, and between 31-62% of its US$ debt in fixed rate.
As of end December 2010, Globe has a total of US$64 million and P5 billion in interest rate swap
contracts that were entered into to achieve these targets (please refer to Note 28.3 of the
attached Notes to the Financial Statements). US$59 million of the total interest rate swaps are
US$ swaps under which the Company effectively swapped some of its floating US$ denominated
loans into fixed rate, with quarterly or semi-annual payment intervals up to April 2012. Globe also
has US$5 million in notional amount of US$ swaps under which the Company receives a fixed
rate of 9.75% and pays a floating rate based on LIBOR, subject to a cap. The payments on the
swap are subject to the performance of 10 and 30 year US$ interest rates. Lastly, the Company
has a P5 billion interest rate swap, under which the Company effectively fixed the rate on an
outstanding floating rate debt.
As of end of December 2010, 65% of peso debt is fixed, while 32% of USD debt is fixed after
swaps.
The MTM of the interest rate swap contracts stood at a loss of P152 million as of end December
2010.
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
tem 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. (Please refer to Note 28.2.2 of the attached Notes to the Financial
Statements for additional information on active and inactive markets).
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 December 2010, the MTM value of the derivatives of the
Globe Group amounted to a loss of P226 million while gains on derivative instruments arising
from changes in MTM reflected in the consolidated income statements amounted to P47 million.
(Please refer to Note 28.8 of the attached Notes to Financial Statements for gains/losses of
preceding periods).
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. (Please
refer to attached Notes 28.2.1.1 and 28.2.1.2 of the Financial Statements for the sensitivity
SEC Form 17A 2010
59
analysis results.) 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) markto-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.
Recent Legal Developments
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 60th 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.
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.
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 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 Court of Appeals
ordered the reinstatement of the case and has forwarded it to the NTC-Olongapo for trial.
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.
SEC Form 17A 2010
60
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 counteraffidavits 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 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 17A 2010
61
ANNEX TO THE 2010 MD&A SECTION
1. Events that will trigger direct or contingent financial obligations that are material
including any default or acceleration of an obligation:
Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous financial year except
for the adoption of the following new and amended PFRS and Philippine Interpretations of
International Financial Reporting Interpretations Committee (IFRIC) which became effective on
January 1, 2010. Except as otherwise indicated, the adoption of the new and amended
Standards and Interpretations did not have a significant impact on the consolidated financial
statements.
•
Revised PFRS 3, Business Combinations and Philippine Accounting Standard (PAS) 27,
Consolidated and Separate Financial Statements
The revised PFRS 3 introduces a number of changes in the accounting for business
combinations that will impact the amount of goodwill recognized, the reported results in the
period that an acquisition occurs, and future reported results. The revised PAS 27 requires,
among others, that (a) change in ownership interests of a subsidiary (that do not result in loss
of control) will be accounted for as an equity transaction and will have no impact on goodwill
nor will it give rise to a gain or loss; (b) losses incurred by the subsidiary will be allocated
between the controlling and non-controlling interests (NCI) (previously referred to as ‘minority
interests’), even if the losses exceed the non-controlling equity investment in the subsidiary;
and (c) on loss of control of a subsidiary, any retained interest will be remeasured to fair value
and this will impact the gain or loss recognized on disposal.
•
Philippine Interpretation IFRIC17, Distribution of Non-cash Assets to Owners
This Interpretation provides guidance on accounting for arrangements whereby an entity
distributes non-cash assets to shareholders either as a distribution of reserves or as
dividends.
•
Amendment to PAS 39, Financial Instruments: Recognition and Measurement - Eligible
Hedged Items
This Amendment clarifies that an entity is permitted to designate a portion of the fair value
changes or cash flow variability of a financial instrument as a hedged item. This also covers
the designation of inflation as a hedged risk or portion in particular situations. The Group has
concluded that the amendment will have no impact on the financial position or performance of
the Group, as the Group has not entered into any such hedges.
•
Amendments to PFRS 2, Share-based Payment: Group Cash-settled Transactions
This Amendment clarifies the scope and the accounting for group cash-settled share-based
payment transactions.
Improvements to PFRSs
The omnibus amendments to PFRSs issued in May 2008 and April 2009 were issued primarily
with a view to removing inconsistencies and clarifying wordings. There are separate transitional
provisions for each standard. The adoption of these amended standards did not have any
significant impact on the consolidated financial statements of the Globe Group, unless otherwise
indicated.
Issued in May 2008
• IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
This Amendment clarifies that when a subsidiary is classified as held for sale, all its assets
and liabilities are classified as held for sale, even when the entity remains a
non-controlling interest after the sale transaction. The Amendment is applied prospectively.
SEC Form 17A 2010
62
Issued in April 2009
• PFRS 2, Share-based Payment
This Amendment clarifies that the contribution of a business on formation of a joint venture
and combinations under common control are not within the scope of PFRS 2 even though
they are out of scope of PFRS 3.
•
PFRS 5, Non-current Assets Held for Sale and Discontinued Operations
This Amendment clarifies that the disclosures required in respect of non-current assets and
disposal groups classified as held for sale or discontinued operations are only those set out in
PFRS 5. The disclosure requirements of other PFRSs only apply if specifically required for
such non-current assets or discontinued operations.
•
PFRS 8, Operating Segments
This Amendment clarifies that segment assets and liabilities need only be reported when
those assets and liabilities are included in measures that are used by the chief operating
decision maker.
•
PAS 1, Presentation of Financial Statements
This Amendment clarifies that the terms of a liability that could result, at anytime, in its
settlement by the issuance of equity instruments at the option of the counterparty do not
affect its classification.
•
PAS 7, Statement of Cash Flows
This Amendment explicitly states that only expenditure that results in a recognized asset can
be classified as a cash flow from investing activities.
•
PAS 17, Leases
This Amendment removes the specific guidance on classifying land as a lease. Prior to the
amendment, leases of land were classified as operating leases. This Amendment requires
that leases of land are classified as either ‘finance’ or ‘operating’ in accordance with the
general principles of PAS 17.
•
PAS 36, Impairment of Assets
This Amendment clarifies that the largest unit permitted for allocating goodwill, acquired in a
business combination, is the operating segment as defined in PFRS 8 before aggregation for
reporting purposes.
•
PAS 38, Intangible Assets
This Amendment clarifies that if an intangible asset acquired in a business combination is
identifiable only with another intangible asset, the acquirer may recognize the group of
intangible assets as a single asset provided the individual assets have similar useful lives. It
clarifies that the valuation techniques presented for determining the fair value of intangible
assets acquired in a business combination that are not traded in active markets are only
examples and are not restrictive on the methods that can be used.
•
PAS 39, Financial Instruments: Recognition and Measurement
This Amendment clarifies the following: 1) that a prepayment option is considered closely
related to the host contract when the exercise price of a prepayment option reimburses the
lender up to the approximate present value of lost interest for the remaining term of the host
contract; 2) that the scope exemption for contracts between an acquirer and a vendor in a
business combination to buy or sell an acquiree at a future date applies only to binding
forward contracts, and not derivative contracts where further actions by either party are still to
be taken and 3) that gains or losses on cash flow hedges of a forecast transaction that
subsequently results in the recognition of a financial instrument or on cash flow hedges of
recognized financial instruments should be reclassified in the period that the hedged forecast
cash flows affect profit or loss.
•
Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives
This Interpretation clarifies that it does not apply to possible reassessment, at the date of
acquisition, to embedded derivatives in contracts acquired in a combination between entities
or businesses under common control or the formation of a joint venture.
SEC Form 17A 2010
63
•
Philippine Interpretation IFRIC 16, Hedges of a Net Investment in a Foreign Operation
This Interpretation states that, in a hedge of a net investment in a foreign operation, qualifying
hedging instruments may be held by any entity or entities within the group, including the
foreign operation itself, as long as the designation, documentation and effectiveness
requirements of PAS 39 that relate to a net investment hedge are satisfied.
Future Changes in Accounting Policies
The Globe Group will adopt the following new and amended standards and interpretations
enumerated below when these become effective. Except as otherwise indicated, the Globe
Group does not expect the adoption of these new and amended PFRS and Philippine
Interpretations to have significant impact on the consolidated financial statements.
Effective 2011
• Amendment to PAS 24, Related Party Disclosures
This Amendment is effective for annual periods beginning on or after January 1, 2011.
It clarifies the definition of a related party to simplify the identification of such relationships
and to eliminate inconsistencies in its application. The revised standard introduces a partial
exemption of disclosure requirements for government-related entities. Early adoption is
permitted for either the partial exemption for government-related entities or for the entire
standard.
•
Amendment to PAS 32, Financial Instruments: Presentation - Classification of Rights Issues
This Amendment is effective for annual periods beginning on or after February 1, 2010.
It amended the definition of a financial liability in order to classify rights issues (and certain
options or warrants) as equity instruments in cases where such rights are given pro rata to all
of the existing owners of the same class of an entity’s non-derivative equity instruments, or to
acquire a fixed number of the entity’s own equity instruments for a fixed amount in any
currency.
•
Amendments to Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding
Requirement
This Amendment is effective for annual periods beginning on or after January 1, 2011, with
retrospective application. It provides guidance on assessing the recoverable amount of a net
pension asset. The amendment permits an entity to treat the prepayment of a minimum
funding requirement as an asset.
•
Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments
This Interpretation is effective for annual periods beginning on or after July 1, 2010.
It clarified that equity instruments issued to a creditor to extinguish a financial liability qualify
as consideration paid. The equity instruments issued are measured at their fair value. In case
that this cannot be reliably measured, the instruments are measured at the fair value of the
liability extinguished. Any gain or loss is recognized immediately in profit or loss.
Improvements to PFRSs
The omnibus amendments to PFRSs issued in May 2010 were issued primarily with a view to
removing inconsistencies and clarifying wordings. There are separate transitional provisions for
each standard and will become effective January 1, 2011. Except otherwise stated, the Globe
Group does not expect the adoption of these new standards to have significant impact on the
consolidated financial statements.
•
PFRS 3, Business Combinations (Revised)
This Amendment clarifies that the Amendments to PFRS 7, Financial Instruments:
Disclosures, PAS 32 and PAS 39 that eliminate the exemption for contingent consideration,
do not apply to contingent consideration that arose from business combinations whose
acquisition dates precede the application of PFRS 3 (as revised in 2008).
It also limits the scope of the measurement choices that only the components of NCI that are
present ownership interests that entitle their holders to a proportionate share of the entity’s
net assets, in the event of liquidation, shall be measured either: at fair value or at the present
ownership instruments’ proportionate share of the acquiree’s identifiable net assets. Other
SEC Form 17A 2010
64
components of NCI are measured at their acquisition date fair value, unless another
measurement basis is required by another PFRS.
The Amendment also requires an entity (in a business combination) to account for the
replacement of the acquiree’s share-based payment transactions (whether obliged or
voluntarily), i.e., split between consideration and post combination expenses. However, if the
entity replaces the acquiree’s awards that expire as a consequence of the business
combination, these are recognized as post-combination expenses. It further specifies the
accounting for share-based payment transactions that the acquirer does not exchange for its
own awards: if vested - they are part of NCI and measured at their marked-based measure; if
unvested - they are measured at market-based value as if granted at acquisition date, and
allocated between NCI and post-combination expense.
•
PFRS 7, Financial Instruments: Disclosures
This Amendment emphasizes the interaction between quantitative and qualitative disclosures
and the nature and extent of risks associated with financial instruments.
The amendments to quantitative and credit risk disclosures are as follows:
a) Clarify that only financial assets whose carrying amount does not reflect the maximum
exposure to credit risk need to provide further disclosure of the amount that represents the
maximum exposure to such risk.
b) Requires, for all financial assets, disclosure of the financial effect of collateral held as security
and other credit enhancements regarding the amount that best represents the maximum
exposure to credit risk (e.g., a description of the extent to which collateral mitigates credit
risk).
c) Remove disclosure of the collateral held as security, other credit enhancements and an
estimate of their fair value for financial assets that are past due but not impaired, and financial
assets that are individually determined to be impaired.
d) Remove the requirement to specifically disclose financial assets renegotiated to avoid
becoming past due or impaired.
e) Clarify that the additional disclosure required for financial assets obtained by taking
possession of collateral or other credit enhancements are only applicable to assets still held
at the reporting date.
•
PAS 1, Presentation of Financial Statements
This Amendment clarifies that an entity will present an analysis of other comprehensive
income for each component of equity, either in the statement of changes in equity or in the
notes to the financial statements.
•
PAS 27, Consolidated and Separate Financial Statements
This Amendment clarifies that the consequential amendments from PAS 27 made to
PAS 21, The Effect of Changes in Foreign Exchange Rates, PAS 28, Investments in
Associates and PAS 31, Interests in Joint Ventures, apply prospectively for annual periods
beginning on or after July 1, 2009 or earlier when PAS 27 is applied earlier.
•
PAS 34, Interim Financial Reporting
This Amendment provides guidance to illustrate how to apply disclosure principles in PAS 34
and add disclosure requirements around:
a) The circumstances likely to affect fair values of financial instruments and their
classification;
b) Transfers of financial instruments between different levels of the fair value hierarchy;
c) Changes in classification of financial assets;
d) Changes in contingent liabilities and assets.
•
Philippine Interpretation IFRIC 13, Customer Loyalty Programmes
This Amendment clarifies that when the fair value of award credits is measured based on the
value of the awards for which they could be redeemed, the amount of discounts or incentives
otherwise granted to customers not participating in the award credit scheme, is to be taken
into account.
SEC Form 17A 2010
65
Effective 2012
• Philippine Interpretation IFRIC 15, Agreement for the Construction of Real Estate
This Interpretation covers accounting for revenue and associated expenses by entities that
undertake the construction of real estate directly or through subcontractors which should be
applied retroactively and prospectively. It requires that revenue on construction of real estate
be recognized only upon completion, except when such contract qualifies as construction
contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of
services in which case revenue is recognized based on stage of completion. Contracts
involving provision of services with the construction materials and where the risks and reward
of ownership are transferred to the buyer on a continuous basis will also be accounted for
based on stage of completion.
•
PAS 12, Income Taxes, Deferred Tax: Recovery of Underlying Assets
The Amendment to PAS 12 is effective for annual periods beginning on or after
January 1, 2012. It provides a practical solution to the problem of assessing whether recovery
of an asset will be through use or sale. It introduces a presumption that recovery of the
carrying amount of an asset will, normally, be through sale.
•
PFRS 7, Financial Instruments: Disclosures (Amendments) – Disclosures–Transfers of
Financial Assets
The Amendments to PFRS 7 are effective for annual periods beginning on or after
July 1, 2011. It will allow users of financial statements to improve their understanding of
transfer transactions of financial assets (for example, securitizations), including understanding
the possible effects of any risks that may remain with the entity that transferred the assets. It
also requires additional disclosures if a disproportionate amount of transfer transactions are
undertaken around the end of a reporting period.
Effective 2013
• PFRS 9, Financial Instruments: Classification and Measurement
The Standard, as issued in 2010, reflects the first phase of the work on the replacement of
PAS 39 and applies to classification and measurement of financial assets and financial
liabilities as defined in PAS 39. It is effective for annual periods beginning on or after January
1, 2013. In subsequent phases, hedge accounting and derecognition will be addressed. The
completion of this project is expected in early 2011. The adoption of the first phase of this
Standard will have an effect on the classification and measurement of the Globe Group’s
financial assets. The Globe Group will quantify the effect in conjunction with the other phases,
when issued, to present a comprehensive picture.
2. Causes of any material change from period to period: 2010 vs. 2009
Assets
Current
a) Cash and Cash Equivalents – Decreased by P70.94 million primarily due to lower borrowings
and lower cash generated from operating activities.
b) Short term investments and Held to maturity investments – Decreased by P2.78 million due to
maturity of investments in money market placements
c) Receivables-net – Increased by P1.79 billion from Billed mobile and broadband subscriber
and installment sales account driven by increase in subscriber base during the intervening
period.
d) Inventories and Supplies - Increased by P185.58 million driven by higher inventory of devices,
modem and other accessories as well as lower provision for inventory obsolescence and
write-off of prior year balances.
e) Derivative Assets – Lower by P16.42 million attributed to the decrease in MTM value gain of
currency forwards and interest rate swap.
f) Prepayments and other current assets - Increased by 12% or P504.88 million due to higher
advances to suppliers and contractors, various prepayments, creditable withholding taxes and
Input VAT.
g) Assets classified as held for sale - Please refer to Note 25.4 disclosure in the consolidated
financial statements.
SEC Form 17A 2010
66
Noncurrent
a) Property and Equipment – net - Increased by P143.39 million due to additional network
assets put into service reduced by depreciation during the intervening period.
b) Investment Property – net - Down by P22.55 million due to depreciation of investment
properties.
c) Intangible assets and goodwill – net - Up by P265.52 million due to incremental costs incurred
for telecommunication equipment, software licenses and other VAS software applications
reduced by amortization.
d) Investments in Joint Venture – Decreased by P36.79 million due to the Company's share in
net income/loss during the period on the investment in Bridge Mobile Alliance and Globe
BanKo.
e) Deferred Income Tax - net – Down by P71.94 million due to Innove's reversal of deferred tax
on MCIT and NOLCO during the intervening period.
f) Other Noncurrent Assets – Down by P462.72 million due to lower deferred VAT on CAPEX
and amortization of prepaid pension.
Liabilities
Current
a) Accounts payable and Accrued Expenses - Increased by 6% or P1.28 billion largely due to
higher project accruals relative to network expansion, higher traffic settlement payables and
various year-end accruals pertaining to operating expenses.
b) Provisions – Up by P134.99 million as a result of the recent unfavorable Supreme Court
rulings which triggered the increase in provisions for RPT and other probable losses.
c) Derivative Liabilities – Increased by P7.47 million due mainly to wireline MTM loss from data
contracts resulting from lower average forward rates to notional rates as of December 2010.
d) Income Taxes Payable – Down by 1% or P9.23 million primarily due to lower net income
before tax recognized during the year.
e) Unearned Revenues – Down by 19% or P579.13 million significantly due to decline in prepaid
revenues from AMAX sales and promotional callcards.
f) Notes Payable – Decreased by P2.00 billion due to settlement of short term loans utilized for
working capital requirements.
Noncurrent
a) Deferred Tax Liabilities - Decreased by P6.80 million primarily due to the reversal of deferred
b)
c)
d)
e)
tax liability on depreciation net of effect on higher unrealized forex gain and provision for
probable losses and doubtful accounts during the period.
Long-term Debt (current and noncurrent) – Increased by P4.90 billion due to various
borrowings to finance capital expenditures countered by repayments to foreign and local
creditors during the intervening period. (current plus noncurrent)
Derivative Liabilities – Up by P145.94 million mainly due to MTM value loss of cash flow
hedged peso interest rate swap.
Liabilities directly associated with the assets classified as held for sale - Please refer to Note
25.4 disclosure in the consolidated financial statements.
Other Long-term Liabilities (current and noncurrent) – Decreased by P737.87 million mainly
due to the reclassification of C2C liability to the new account Liabilities directly associated
with the assets classified as held for sale; refer to Note 25.4 in the consolidated financial
statements. (current plus non current)
Equity
a) Paid-up Capital – Up by P33.85 million attributed to the issuance of Globe shares due to
exercised stock options during the intervening period.
b) Cost of Share-Based Payments – Increased by P76.43 million due to additional
compensation expense partly reduced by the value of the stock options exercised/forfeited
during the intervening period.
c) Other reserves – Change is due to MTM value loss of peso interest rate swap.
d) Retained Earnings – Decreased by 6% or P843.23 million due to dividends declared to
common and preferred shareholders amounting to P10.64 billion over net income of P9.74
billion during the intervening period.
SEC Form 17A 2010
67
3. 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 10 and 11 in the attached
2010 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. These transactions,
which are accounted for at market prices are normally charged to unaffiliated customers for
similar goods and services.
Globe Telecom also has investments in joint ventures including:
•
Investment in BPI Globe BanKO Inc., A Savings Bank (BPI Globe BanKO) – On July 17,
2009, Globe acquired a 40% stake in BPI Globe BanKO (formerly Pilipinas Savings Bank,
Inc. or PS Bank) for P
= 141.33 million, pursuant to a Shareholder Agreement with Bank of the
Philippine Islands (BPI), AC and PS Bank, and a Deed of Absolute Sale with BPI. BPI Globe
BanKO will have the capability to provide services to micro-finance institutions and retail
clients through mobile and related technology.
•
Investment in Bridge Mobile Pte. Ltd. (BMPL) – Globe Telecom and other leading Asia Pacific
mobile operators (JV partners) signed an Agreement in 2004 (JV Agreement) to form a
regional mobile alliance, which will operate through a Singapore-incorporated company,
BMPL. The JV company is a commercial vehicle for the JV partners to build and establish a
regional mobile infrastructure and common service platform and deliver different regional
mobile services to their subscribers. 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, 2010, Globe Telecom has invested a total of USD2.20 million in the joint
venture.
•
In 2008 and 2009, the Globe Group granted loans to the Globe Telecom retirement fund and
BHI (Bethlehem Holdings, Inc.). The Globe Telecom retirement fund established BHI in 2009
to invest in media ventures. For details, please refer to Note 11 of the 2009 Notes to the
Financial Statements.
4. Seasonal Aspects that have a material effect on the FS
No seasonal aspects that have a material effect on the financial statements.
SEC Form 17A 2010
68
For The Financial Year Ended 2009
GROUP FINANCIAL HIGHLIGHTS
Globe Group
For the Year Ended
Results of Operations (Php Mn)
31 Dec
2009
31 Dec
2008
YoY
Change
(%)
-1%
-1%
-4%
-9%
23%
74%
-26%
-5%
1%
-3%
Net Operating Revenues ………………………………
63,861
64,818
Service Revenues …………………………………..
62,443
62,894
Mobile…………………………………………….
53,321
55,436
Fixed line Voice…………………………………
2,795
3,088
Fixed line Data…………………………………
3,038
2,478
Broadband………………………………………
3,289
1,892
Non-Service Revenues……………………………..
1,418
1,924
Costs and Expenses ………………………………….
27,399
27,420
Cost of Sales………………………………………..
2,948
3,117
Operating Expenses ……………………………….
24,451
24,303
EBITDA …………………………………………………
36,462
37,398
EBITDA Margin………………………………………..
58%
59%
Depreciation and Amortization……………………
17,388
17,028
2%
EBIT …………………………………………………….
19,074
20,370
-6%
EBIT Margin……………………………………………
31%
32%
Financing………………………………………………
(2,183)
(3,000)
-27%
Interest Income……………………………………….
272
420
-35%
Others - net……………………………………………
810
56
1346%
Provision for Income Tax…………………………...
(5,404)
(6,570)
-18%
Net Income After Tax (NIAT)……………………….
12,569
11,276
11%
Core Net Income 1 ……………………………………
12,003
11,765
2%
1
Net income after tax (NIAT) excluding foreign exchange and mark-to-market gains (losses), and nonrecurring items.
•
Consolidated service revenues for 2009 was at P62.4 billion from P62.9 billion in 2008.
Mobile revenues were down 4% due to intense competition and increasing preference of
subscribers for value offers on the back of weak consumer economy. This was partially offset
by a 74% improvement in broadband revenues driven by robust subscriber growth, and a
23% growth in fixed line data revenues for the corporate and enterprise sectors. Mobile
revenues accounted for 85% of total service revenues, down from 88% in 2008. Meanwhile
fixed line and broadband increased its share of consolidated revenues from 12% to 15% in
2009.
•
Operating expenses and subsidy increased by 2% year on year to P26.0 billion from P25.5
billion in 2008 driven by higher subsidies, rent, and services partially offset by lower
marketing costs and provisions. Network-related charges such as rent, electricity and fuel
charges were higher compared to last year as a result of expanded 2G, 3G and broadband
networks. Higher services costs were due to increases in costs for outsourced customer
service and logistics functions. Marketing effectiveness ratio improved however with total
marketing and subsidy expenses at 8% of service revenues compared to prior year’s 9%.
•
Consolidated EBITDA and EBIT posted declines of 3% and 6% year on year on the back of
softer revenues coupled with higher operating expenses. EBITDA and EBIT margins for 2009
were at 58% and 31%, respectively, from 59% and 32% in 2008 given the growing
contribution of the lower-margin fixed line business to consolidated results. On a per-segment
basis, mobile EBITDA margins remained healthy at 65% of service revenues, while
broadband and fixed line margins improved to 22% from 17% last year.
•
The Company closed the year with net income after tax of P12.6 billion, 11% higher than
2008. Excluding foreign exchange, and mark-to-market gains and losses and non-recurring
SEC Form 17A 2010
69
items, the Company’s core net income closed at P12.0 billion or 2% higher than the previous
year.
•
Capital expenditures amounted to P24.7 billion for the year, a 21% increase from last year’s
P20.4 billion. This included carry-over spend related to the Company’s participation in the
TGN-IA international cable system, FOBN2 or Globe’s second fiber optic backbone network,
domestic transmission loops, as well as the expansion and upgrades of the Company’s
broadband and mobile networks. As of end 2009, Globe increased its base stations by 22%
to 10,333 and cellsites by 7% to 6,226 to support its 2G, 3G and WiMAX services.
Geographical coverage stood at 97% while population coverage was at 99%. Total capex as
a percentage of service revenues registered at 40% compared to last year’s 32%. Excluding
the one-time investments, mobile capex as a percentage of mobile revenues was at 13%,
within regional benchmarks for similarly mature markets.
•
For 2010, the Company is allocating about US$500 million in capital expenditures. This
includes US$170 million for the mobile telephony business, and another US$230 million for
the broadband business to augment existing capacities and expand the coverage and
footprint of the Company’s DSL, WiMax, and 3G broadband services. The 2010 capex plan
also includes about US$50 million for Globe’s fixed line data networks which primarily caters
to the corporate and enterprise sector. Finally, the investment plan also includes about
US$50 million in additional one-time investments. This includes costs related to Globe’s
participation in the new Southeast Asia Japan Cable (SJC) System which will link Singapore,
Hong Kong, Indonesia, Philippines and Japan, and which will further increase the capacity
and boost the resiliency of Globe’s international network. The SJC system is expected to be
operational by 2012.
•
Regular and special cash dividends paid out in 2009 amounted to P15.1 billion. Total
dividend payout of P114 per share translates to a dividend yield of 14% based on beginning
of year share prices. Total shareholder return for 2009 was at 30%. Return on equity was at
26%, up from 2008 level of 21% given the higher net profits and as a result of the Company’s
capital management efforts.
SEC Form 17A 2010
70
GROUP OPERATING REVENUES BY SEGMENT
MOBILE BUSINESS
For the Year Ended
Mobile Service Revenues (Php Mn)
Service
Voice1 ….…………………………………………………………
Data 2..……………………………………………………………
Mobile Service Revenues…………………..…….......................
1
31 Dec
2009
26,497
26,824
53,321
31 Dec
2008
YoY
Change
(%)
26,971
28,465
55,436
-2%
-6%
-4%
Mobile voice service revenues include the following:
a)
b)
c)
Monthly service fees on postpaid plans;
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.
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;
Revenues from (b) and (c) are net of any interconnection or settlement payouts to international and local
carriers and content providers.
2
Mobile data service revenues consist of revenues from value-added services such as inbound and outbound SMS
and MMS, content downloading and infotext, subscription fees on unlimited and bucket prepaid SMS services net
of any interconnection or settlement payouts to international and local carriers and content providers.
Mobile Voice
For 2009, Globe’s mobile voice service revenues accounted for 50% of total mobile service
revenues compared to 49% in 2008. Mobile voice revenues of P26.5 billion were 2% lower
compared to 2008 as the growth in bulk and unlimited voice subscriptions were unable to fully
offset the lower regular and IDD voice usage.
During the year, Globe and TM sustained their bulk and unlimited voice offerings such as
Tawag236 for a 20-minute call for P20, Globe’s P10 for a 3-minute call, and TM’s TodoTawag
P15 for a 15-minute call. Globe also sustained its per-second charging promo which allows
subscribers to make on-net voice calls for only P0.10 per second.
To further drive adoption and encourage usage, Globe launched its “Walang Metro” campaign
which includes a slew of unlimited product offers to provide subscribers more value services to
suit their budget and needs. Globe launched the revolutionary DUO and SUPERDUO service, a
two-in-one mobile and landline service, which enables subscribers to make unlimited landline-tolandline and mobile-to-mobile calls to any Globe and TM subscriber for only P499 per month for
postpaid, and P35/day or P599/month for prepaid subscribers. In addition, Globe introduced
SUPER UNLI which allows 24x7 unlimited call and text to any Globe/TM subscriber nationwide
for only P150 for 5 days for both postpaid and prepaid subscribers. UNLIcall is also available in
selected areas, providing subscribers with unlimited intra-network voice service for only P30/day
or P100/5 days. Following the launch of its youth-oriented prepaid brand Globe Tattoo, the
Company also introduced IMMORTALCALL+ - a unique bucket call and text service which
includes a 5 minute call and 50 intra-network SMS with no expiry for only P15.
Mobile Data
Globe’s mobile data business contributed 50% to total mobile net service revenues. Service
revenues for the year totaled to P26,824 million compared to P28,465 million in 2008. While
revenues from bucket, unlimited SMS subscriptions, and mobile browsing improved year on year,
lower regular SMS and core value-added services usage declined, resulting in mobile data
revenues that were 6% lower compared to 2008.
SEC Form 17A 2010
71
To cater to the growing preference for bucket and unlimited SMS offers, Globe sustained its
popular offerings such as Sulitxt, Everybodytxt, Astigtxt, UnliTxt, UnliTxt Dayshift and Nightshift
and TodoText promotions. In addition, the Company introduced pioneering offerings such as
ImmortalTxt, the first and only SMS offer in the industry with no expiry period. Globe also
introduced Immortal Load – a prepaid load option with no expiry which can be used for voice,
SMS or mobile browsing. The SMS allocations and prepaid load will not expire as long as the
subscriber maintains at least P1 in his prepaid wallet.
To keep up with the needs of the growing youth segment, Globe introduced UnliChat+ which
provides subscribers with unlimited intra-SMS and unlimited chat via Yahoo Messenger (YM). In
addition, subscribers can enjoy unlimited intra-SMS, a 15-minute call and 10 off-net SMS with
Globe’s UnliTxt Trio.
To further encourage mobile browsing usage, Globe introduced mobile internet add-on plans to
provide postpaid subscribers access to the internet using their Blackberry (starting at Plan700) or
using regular handsets in tiered and affordable plans (starting at Plan149). Subscribers can also
enjoy unlimited surfing through Super Surf which is an unlimited browsing add-on plan for an
additional fee of P1,200 per month, P220 for 5 days or P50 per day for postpaid subscribers. For
prepaid users, subscribers can choose to do unlimited browsing with Surf All Day for only P20 per
day per site (including popular sites such as Facebook, Wikipedia, Plurk, Friendster, Twitter).
Globe also launched entry-level iPhone plans starting at Plan399 following the launch of the new
iPhone 3GS.
SEC Form 17A 2010
72
The key drivers for the mobile business are set out in the table below:
For the Year Ended
Cumulative Subscribers (or SIMs) Net (End of
period)
Globe Postpaid . …………………………………………
31 Dec
31 Dec
YoY
2009
2008 *
Change (%)
23,245,006
24,646,600
-6%
851,368
795,695
7%
Prepaid .…………………………………………………..
Globe Prepaid ………………………………………
TM ……………………………………………………
22,393,638
13,048,861
9,344,777
23,850,905
13,293,232
10,557,673
-6%
-2%
-11%
Net Subscriber (or SIM) Additions……………………
Globe Postpaid . …………………………………………
(1,401,594)
55,673
4,338,251
95,125
-132%
-41%
Prepaid .……………………………………………………
Globe Prepaid ………………………………………
TM ……………………………………………………
(1,457,267)
(244,371)
(1,212,896)
4,243,126
1,175,157
3,067,969
-134%
-121%
-140%
1,822
1,967
-7%
241
279
-14%
124
135
-8%
1,283
1,394
-8%
182
98
209
103
-13%
-5%
5,382
4,968
8%
-8%
-
Average Revenue Per Subscriber (ARPU)
Gross ARPU
Globe Postpaid . ……………………………………….
Prepaid
Globe Prepaid ……………………………………….
TM …………………………………………………..
Net ARPU
Globe Postpaid . ……………………………………….
Prepaid
Globe Prepaid ……………………………………....
TM …………………………………………………..
Subscriber Acquisition Cost (SAC)
Globe Postpaid . ………………………………………
Prepaid
Globe Prepaid ………………………………………
TM …………………………………………………..
Average Monthly Churn Rate (%)
Globe Postpaid . ………………………………………
37
34
40
34
1.95%
1.64%
Prepaid
Globe Prepaid ………………………………………
TM ……………………………………………………
6.75%
8.35%
5.74%
6.73%
* Prior period figures have been restated to reflect adjustments for mobile broadband and hybrid postpaid plans.
Globe ended the year with a cumulative mobile subscriber base of 23.2 million, 6% lower than
last year’s 24.6 million SIMs. The Company recalibrated its subscriber acquisition efforts
beginning in the second quarter to focus on better quality subscribers, while deliberately churning
out its marginal users. As a result, full year mobile gross additions were lower by 5% at 19.4
million SIMs from 20.5 million SIMs in 2008. Blended churn rates were also elevated at 7.2%
compared to 6.0% last year, resulting in a 1.4 million net reduction in Globe’s SIM base.
Subscriber growth resumed in the fourth quarter as Globe closed the period with net additions of
about 117,000 SIMs. Fourth quarter gross additions were up 30% compared to the prior quarter
SEC Form 17A 2010
73
while churn rates were lower, with the adjustments in the Company’s acquisition and subscriber
retention programs, and the continued clean-up of its SIM base.
The succeeding sections cover the key segments and brands of the mobile business – Globe
Postpaid, Globe Prepaid and TM.
Globe Postpaid
Globe’s postpaid segment comprised about 4% of its total subscriber base. Total postpaid gross
and net subscriber additions for the period were 224,354 and 55,673, respectively compared to
the 242,587 and 95,125 registered for the same period last year. Cumulative subscribers as of
end 2009 grew 7% to more than 851,000 on the back of higher subscriptions particularly from
hybrid plans.
Postpaid gross and net ARPUs of P1,822 and P1,283, were lower than last year’s P1,967 and
P1,394 on account of lower average voice usage offset by higher take up of SMS and mobile
browsing services.
Postpaid SAC increased 8% year on year to P5,382 from P4,968 due to increased handset
subsidies for new postpaid offers, as well as higher advertising and promotion charges.
Prepaid
Globe’s prepaid segment, which includes the Globe Prepaid and TM brands, comprised 96% of
its total subscriber base.
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 3 days to 120 days after activation.
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.
The succeeding sections discuss the performance of the Globe Prepaid and TM brands in more
detail.
a. Globe Prepaid
Globe Prepaid currently accounts for 56% of the total mobile SIM base compared to 54% in 2008.
The brand posted a 2% decline in its SIM base and closed the year with 13.0 million SIMs from
13.3 million in 2008. Gross additions of 10.4 million were 5% higher compared to last year’s 9.9
million. However, higher churn resulting from intense market competition and deliberate churn out
of marginal subscribers resulted in net reductions of about 244,000 against last year’s net
additions of 1.2 million SIMs.
Gross and net ARPUs for Globe Prepaid declined by 14% and 13%, respectively, as revenues
continue to be impacted by intense competition, declining yields, and multi-SIM usage.
The Company re-launched Globe Tattoo as a convergent brand in 2009 to serve both the internet
and telephony needs of today’s digitally-attuned youth. With hip and new SIM card designs,
Globe Tattoo SIMs can be used for both mobile phone use, and through the Globe broadband
SEC Form 17A 2010
74
Tattoo USB stick for internet browsing using a laptop.
Following the recalibration of its acquisition drives to focus on better-quality subscribers, Globe
Prepaid SAC declined 8% year on year from P40 to P37. SAC continues to be recoverable within
a month’s net ARPU.
b. TM
Globe’s mass market brand TM ended the year with 9.3 million subscribers, 11% lower than last
year’s 10.6 million SIMs. TM registered gross additions of 8.8 million, down by 16% from last
year as the Company scaled back on some of its aggressive SIM pack promotions and
recalibrated its sales drives to focus on better quality subscribers. The Company also churned
out some of its marginal, lower-quality subscribers, resulting in a net reduction of 1.2 million SIMs
in TM’s subscriber base. TM subscribers now comprise 40% of Globe’s cumulative subscriber
base compared to 43% in 2008.
TM’s net ARPU for 2009 was 5% lower compared to prior year, but showed improvements
particularly during the last two quarters of the year. Total TM revenues also grew by 5% year on
year despite the 11% contraction in its SIM base. The “Republika ng TM” brand refresh
campaign, the distinct positioning of the brand, and the sustained efforts to drive usage through
affordable voice and text offerings all contributed to the continued top-line growth of the TM
brand.
TM’s SAC remained at P34 and remains recoverable within half a month’s net ARPU.
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. Net
registered GCash user base at the end of 2009 totaled 1.04 million.
To enable further linkages of GCash’s platform and mobile technology with microfinance
activities, Globe, the Bank of the Philippine Islands (BPI) and Ayala Corporation (AC) signed a
memorandum of agreement in 2008 to form a joint venture that would allow rural and low-income
customers’ access to financial products and services beyond remittances. Last October 2009, the
Bangko Sentral ng Pilipinas (BSP) approved the sale and transfer by BPI of its shares of stock in
Pilipinas Savings Bank, Inc. (PSBI), formalizing the creation of the venture. Globe’s and BPI’s
ownership stakes in the company is at 40% each, while AC’s shareholding is at 20%. The
partners plan to transform PSBI (now called BPI GLOBE BANKO INC.) into the country’s first
mobile microfinance bank.
SEC Form 17A 2010
75
FIXED LINE AND BROADBAND BUSINESS
For the Year Ended
1
31-Dec
31-Dec
2009
2008
YoY
Change
(%)
Service
Fixed line Voice 1 ….………………………………………
Fixed line Data 2……………………………………………
2,795
3,038
3,088
2,478
-9%
23%
Broadband 3..……………………………………………….
3,289
1,892
74%
9,122
7,458
22%
Fixed line and Broadband Net Service Revenues………
Fixed line voice net service revenues consist of the following:
g)
h)
i)
j)
k)
l)
Monthly service fees including CERA of voice-only subscriptions;
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, multicalling, voice mail, duplex and hotline numbers and other value-added features; and
Installation charges and other one-time fees associated with the establishment of the service.
Revenues from DUO service consisting of monthly service fees for postpaid and subscription
fees for prepaid
Revenues from (a) to (c) are net of any interconnection or settlement payments to domestic and
international carriers.
2
Fixed line data net service revenues consist of the following:
e)
f)
g)
h)
3
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.
Broadband net service revenues consist of the following:
e)
f)
g)
h)
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 wireless 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.
SEC Form 17A 2010
76
Fixed line Voice
Globe Group
For the Year Ended
Cumulative Voice Subscribers – Net (End of period) 1
……
Average Revenue Per Subscriber (ARPU)
Gross ARPU…………………………………………………
NetARPU………………………………………………….…
Average Monthly Churn Rate ..………………………………
1
YoY
Change
(%)
31 Dec
2009
31 Dec
2008
589,331
420,270
40%
543
476
3.39%
699
613
2.21%
-22%
-22%
Includes DUO and SuperDUO subscribers; Prior period figures have been restated for comparability.
Cumulative fixed line voice subscribers grew 40% year on year driven mainly by higher
subscriptions to bundled voice and broadband plans, as well as the DUO and SUPERDUO
service. Despite the expansion in subscriber base, fixed line voice revenues declined by 9% from
last year given the higher proportion of bundled voice and data subscriptions compared to standalone, voice-only plans (please note that the monthly service fees for bundled services are
included in “Broadband”).
During the year, Globe launched the DUO service - an innovative product that combines a mobile
and wireless landline service into one handset. For an incremental monthly service fee of P399
on top of the regular MSF of postpaid plans, DUO subscribers are provided a landline number
linked to their current mobile number which they can use to make unlimited calls to any landline
within the same area code and to other DUO subscribers. Later in the year, Globe also
introduced SUPERDUO, an improvement over the original DUO service to include unlimited
mobile-to-mobile calls to any Globe and TM subscriber (refer to mobile section for more details).
Fixed line Data
Globe Group
For the Year Ended
Service Revenues (Php Mn)
Fixed line Data
International …..…………………………………………
Domestic …… ………………………………………….
Others 1 …………………………………………………
Total Fixed line Data Service Revenues………………………
1
31 Dec
2009
944
1,362
732
3,038
31 Dec
2008
YoY
Change
(%)
719
1,130
629
2,478
31%
21%
16%
23%
Includes revenues from value-added services such as internet, data centers and bundled services.
The fixed line data segment continued to post strong revenue gains, ending the year with P3.0
billion in revenues, up 23% year on year. Growth has been fueled by the company’s expansion of
its network of high-speed data nodes, transmission links, and international bandwidth capacity to
serve the requirements of business and enterprise clients, including those in the offshoring and
outsourcing industries.
SEC Form 17A 2010
77
Broadband
For the Year Ended
Cumulative Broadband Subscribers
Wireless 1 ………………………………………………
Wired……………………………………………………
Total (end of period)……………………………………
1
31 Dec
31 Dec
2009
2008
499,383
216,089
715,472
81,293
149,675
230,968
YoY
Change
(%)
514%
44%
210%
Includes fixed wireless and fully mobile broadband subscribers.
Globe’s broadband business sustained strong growth in both revenues and subscribers.
Broadband subscribers grew three-fold from 2008 to close the year with more than 715,000
subscribers, exceeding full year guidance of half a million subscribers. The business delivered
P3.3 billion in service revenues in 2009, up a robust 74% from prior year. The broadband
segment now comprises 5% of consolidated revenues compared to 3% last year.
A key contributor to the growth in the Company’s broadband business is its fully mobile
broadband service sold under the Globe Broadband Tattoo brand. The brand is targeted towards
the fast-growing youth segment, particularly those who require affordable, on-the-go broadband
connections. This mobile internet service is available in prepaid and postpaid variants with
download speeds of up to 2 Mbps. New postpaid Tattoo plans starting from Plan 799 up to Plan
1499 were launched which include free browsing hours with low per hour charges for usage in
excess of the monthly limit.
For the prepaid variant, Globe lowered entry costs for the service by reducing the price of its
Globe Broadband Tattoo prepaid kit from P2,500 to P895. The package comes with a USB
modem stick and free P200 prepaid credit so subscribers can immediately use the service. Tattoo
SIMs are also voice, SMS, international roaming and VAS capable. Reloads can be made
through the usual prepaid top-up channels including over-the-air reload facility through any of its
Globe AutoLoad Max retailers.
Globe’s primary fixed wireless broadband offering is based on the WiMax technology,
complementing the company’s existing 3G with HSDPA service which is used for mobile, on-thego broadband. Following its commercial launch in 2008, the Company’s WiMAX service is now
available in over 190 towns and cities nationwide. The service has gained good traction with
customer satisfaction ratings remaining high. Globe’s WiMax service is available in data-only
plans at 512kbps and 1mbps for P795 and P995 per month, respectively. WiMax bundled voice
and data plans are also offered at 512kbps and 1 mbps for P995 and P1,295 per month.
Wireless subscribers now account for 70% of cumulative broadband subscribers, up from 35% at
the end of 2008.
SEC Form 17A 2010
78
OTHER GLOBE GROUP REVENUES
International Long Distance (ILD) Services
Globe Group
For the Year Ended
ILD Revenues and Minutes
Total ILD Revenues (Php Mn) ……………………………………………………
Average Exchange rates for the period (Php to US$1)…………………………
Total ILD Revenues as a percentage of net service revenues…………………
Total ILD Minutes (in million minutes) 1…………………………………………
Inbound……………………………………………………………………………
Outbound.…………………………………………………………………………
ILD Inbound / Outbound Ratio (x) ……………………………………………
1
YoY
31 Dec 31 Dec
Change
2009 2008
(%)
14,317 14,915
47.777 43.946
23%
24%
2,388
2,019
369
5.47
2,457
2,131
326
6.54
-4%
9%
-3%
-5%
13%
ILD minutes originating from and terminating to Globe and Innove networks.
Both Globe and Innove offer ILD voice services which cover international call services between
the Philippines to more than 200 destinations with over 500 roaming partners. Globe’s 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
decreased by 4% to P
= 14,317 million compared to last year’s P
= 14,915 million following a 3%
decline in total ILD traffic. While outbound traffic grew 13% year on year, inbound traffic declined,
driving the net reduction in ILD minutes.
To grow its international service revenues, Globe sustained its popular TipIDD offers, as well as
OFW SIM packs. The Company also launched IDD Suki – the first and only IDD load (prepaid
credit) that can be purchased from AMAX retailers nationwide. The load is available in P20 and
P30 denominations and which can be used for calls to popular OFW destinations worldwide.
Globe also launched its “Worldwidest” campaign in the last quarter, highlighting the multitude of
international services available to its subscribers. This includes promotional call rates to popular
OFW destinations worldwide, low calling rates via its TipIDD card, and affordable IDD Suki load
credits that can be purchased from its extensive and nationwide AMAX retailer network.
To spur additional outbound IDD voice traffic during the holidays, Globe also announced a P5 per
minute calling rate to selected Bridge Mobile operators, using a specific dialing prefix. Globe also
extended its affordable iTxt rates to selected operators and lowered rates for international SMS to
P5, from P15.
Interconnection
Domestically, the Globe Group pays interconnection access charges to other carriers for calls
originating from its network terminating to other carriers’ networks, and hauling charges for calls
that pass through Globe’s network terminating in another network.
Internationally, the Globe Group also incurs payouts for outbound international calls which are
based on a negotiated price per minute, and collects termination fees from foreign carriers for
calls terminating in its network. The Globe Group also collects interconnection access charges
from local carriers whose calls and SMS terminate in Globe Group’s network.
SEC Form 17A 2010
79
GROUP OPERATING EXPENSES
In 2009, the Globe Group’s total costs and expenses, including depreciation, increased by 2%
year on year to P
= 43,369 million from P
= 42,524 million in 2008. This growth is mainly driven by
higher network-related expenses such as rent, repairs and maintenance as well as outsourced
services as the Company continues to expand and upgrade its mobile, broadband and corporate
data networks.
Globe Group
For the Year Ended
Costs and Expenses (Php Mn)
31 Dec
2009
YoY
31 Dec
Change
2008
(%)
Cost of sales…………………………………………………………………….
Non-service revenues………………………………………………………….
2,948
(1,418)
3,117
(1,924)
-5%
-26%
Subsidy…………………………………………………………………………
1,530
1,193
28%
Selling, Advertising and Promotions ……………………………………….
Staff Costs ……………………………………………………………………..
Utilities, Supplies & Other Administrative Expenses……………………….
Rent………………………………………………………………………………
Repairs and Maintenance……………………………………………………..
Provisions ………………… …………………………………………………..
Services and Others……………………………………………………………
3,766
4,981
2,693
3,469
2,582
725
6,235
4,494
5,077
2,710
2,883
2,495
1,237
5,407
-16%
-2%
-1%
20%
3%
-41%
15%
Operating Expenses…………………………………………………………
24,451
24,303
1%
Depreciation and Amortization ……………….…………………………..
17,388
17,028
2%
Total Costs and Expenses…………………………………………………
43,369
42,524
2%
Subsidy and Marketing
Total subsidy and selling, advertising and promotions for 2009 declined 7% year on year to
P5,296 million from P5,687 million in 2008. Total subsidies increased by 28% year on year to
P1,530 million from P1,193 million last year. This is due to higher mobile postpaid subsidies
resulting from the launch of the iPhone 3GS and good take up of hybrid plans, as well as strong
demand for Globe Broadband Tattoo. On the other hand, selling, advertising and promotion were
lower by P728 million or 16% due to the recalibration of its mobile subscriber acquisition drives
and deferment of certain marketing programs originally planned for the fourth quarter of 2009
following the widespread damage and devastation caused by typhoons Ondoy and Pepeng which
hit the country in late September and early October.
As a percentage of service revenues, total subsidy and selling, advertising and promotions was at
8% in 2009 compared to 9% in 2008.
Staff Costs
Staff costs, which accounted for 19% of total subsidy and operating expenses, decreased by 2%
year on year from P5,077 million to P4,981 million, mainly driven by lower headcount, pension
costs and other employee benefits. Total headcount decreased by 7% year on year to 5,451 from
5,850 as of end 2008 with increased outsourcing.
Rent
Rent expenses, which accounted for 13% of total subsidy and operating expenses, increased by
P586 million or 20% year on year due to charges from additional interconnection and
transmission facilities to support the Company’s growing broadband and fixed line data business.
SEC Form 17A 2010
80
Cell site leases also grew from last year with the expansion of Globe’s mobile, broadband and
other network facilities.
Provisions
This account includes provisions related to trade, non-trade and traffic receivables and inventory.
Overall, provisions posted a net decrease of 41% year on year or P512 million as a result of lower
receivable provisions resulting from the final settlement of previously provisioned traffic
receivables as well as the write-down of modems for CDMA service in 2008.
Services and Others
Services and Others, which accounted for 24% of total subsidy and operating expenses,
increased by 15% or P828 million from P5,407 million to P6,235 million, mainly on higher charges
related to various outsourced functions such as call centers, technical helpdesk, line installation
services, as well as other services related to the Company’s expanded mobile and broadband
network.
Depreciation and Amortization
Depreciation and amortization expenses increased by 2% year on year or P360 million to
P17,388 million from P17,028 million due to additional investments resulting from the continued
expansion of the Company’s broadband and mobile networks.
SEC Form 17A 2010
81
Other Income Statement Items
Other income statement items include net financing costs, interest income, and net property and
equipment related charges as shown below:
Globe Group
For the Year Ended
Non-operating Charges (Php Mn)
Financing Costs – net
Interest Expense…………………………………………….
Gain (Loss) on derivative instruments – net………………
Swap costs and other financing costs……………………
Foreign Exchange (loss) – net…………………………….
31-Dec
31-Dec
2009
2008
YoY
Change
(%)
Foreign Exchange gain - net…………………………………
Interest Income ………………………………………………..
Others – net…………………………………………………….
(2,097)
(47)
(39)
(2,183)
287
272
523
(2,256)
2
13
(759)
(3,000)
420
56
-7%
-2450%
-400%
-27%
-35%
834%
Total Other Expenses…………………………………………
(1,101)
(2,524)
-56%
As of end 2009, the Globe Group’s non-operating charges posted a 56% year on year decrease
of P1,423 million to close at P1,101 million. This was partly due to a gain in the first quarter of
2009, reflected under “Others-net”, from an exchange transaction undertaken by Globe with one
of its equipment suppliers to convey and transfer ownership of existing telecommunications
equipment in exchange for a more advanced system. This resulted in an after-tax gain amounting
to P398 million, equivalent to the difference between the value of the new system and carrying
amount of the old equipment.
With the Philippine peso registering a 3% appreciation from January to December 2009
compared to last year’s 15% depreciation, the Company recorded foreign exchange gains of
P287 million during the current period in contrast to the foreign exchange losses of P759 million
booked last year. (See related discussion on derivative instruments and swap costs in the Foreign
Exchange and Interest Rate Exposure section).
Meanwhile, interest expense decreased by 7% from P2,256 million last year to P2,097 million
despite higher borrowings during the year mainly driven by the decline in average local and
foreign interest rates and higher capitalized interest during the period. Interest income also
decreased by 35% from P420 million to P272 million on lower short-term and held-to-maturity
investments coupled with the declining peso and US$ interest rates.
Consolidated basic earnings per common share were P94.59 and P84.75 while consolidated
diluted earnings per common share were P94.31 and P84.61 for the years 2009 and 2008,
respectively.
SEC Form 17A 2010
82
Liquidity and Capital Resources
Globe Group
LIQUIDITY AND CAPITAL RESOURCES
31 Dec
31 Dec
2009
2008
Balance Sheet Data
Total Assets ………………………………………………
Total Debt …………………………………………………
Total Stockholders’ Equity ………………………………
127,644
47,477
47,709
119,751
40,588
50,092
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) ...…………
1.30
2.08
11.89
1.00
0.87
0.50
0.28
1.09
4.74
13.74
0.81
0.69
0.45
0.29
YoY
Change
(%)
7%
17%
-5%
Globe Group’s consolidated assets as of 2009 amounted to P
= 127,644 million compared to P
=
119,751 million in 2008.
Consolidated cash, cash equivalents and short term investments (including investments in assets
available for sale and held to maturity investments) was at P5,943 million at the end of period
compared to last year’s P
= 5,782 million. Gross debt to equity ratio reached 1.00:1 on a
consolidated basis 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 0.87:1 as of the end of 2009 compared to
0.69:1 in 2008.
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 2 exceeding 1.3 times; and
Secured debt ratio 3 not exceeding 0.2 times.
As of 31 December 2009, Globe is well within the ratios prescribed under its loan agreements.
1
Net debt is calculated by subtracting cash, cash equivalents and short term investments from total debt.
2
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.
3
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 December 2009.
SEC Form 17A 2010
83
Consolidated Net Cash Flows
Globe Group
Net Cash from Operating Activities……………………
30,367
22,507
YoY
change
(%)
35%
Net Cash from Investing Activities…………………….
(21,829)
(16,581)
32%
Net Cash from Financing Activities……………………
(8,334)
(6,365)
31%
(Php Mn)
31 Dec
2009
31 Dec
2008
Net cash flow from operations increased by 35% year on year to P30,367 million due to higher
cashflows from operations compared to the previous year.
Net cash flow from investing activities increased by 32% year on year to P21,829 million as a
result of higher investments in property and equipment.
Globe Group
(Php Mn)
Capital Expenditures (Cash) ……………………………………….
Increase (decrease) in Liabilities related to Acquisition of PPE…
Total Capital Expenditures1 …………………………………….
Total Capital Expenditures / Service Revenues (%)…………
1
31 Dec
2009
22,057
2,645
24,702
31 Dec
2008
19,417
965
20,382
40%
32%
YoY change
(%)
14%
174%
21%
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 capital expenditures for 2009 increased by 21% year on year to P
= 24,702 million
from last year’s P20,382 million as a result of higher investments in one-time international cable
facilities and domestic transmission systems, as well as sustained expenditures to upgrade the
Company’s mobile networks and expand the coverage and capacities of its broadband networks.
For 2010, the Company has earmarked about US$500 million in capital expenditures. This
includes US$170 million for the mobile telephony business, and another US$230 million for the
broadband business to augment existing capacities and expand the coverage and footprint of the
Company’s DSL, WiMax, and 3G broadband services. Globe is also allocating about US$50
million for its fixed line data networks which primarily caters to the corporate and enterprise sector
and another US$50 million in additional one-time investments. These one-time investments
include costs related to Globe’s participation in the new Southeast Asia Japan Cable (SJC)
System which is expected to be operational by 2012.
Consolidated net cash used in financing increased by 31% to P
= 8,334 million in 2009 due to
increased repayments and dividends offset by higher borrowings during the current year.
Consolidated total debt increased by 17% from P
= 40,588 million to P
= 47,477 million in 2009. Loan
repayments of Globe for the period amounted to P
= 13,822 million or a 75% increase compared to
the P
= 7,916 million paid in 2008.
Out of total debt of US$1,027 million, 14% are denominated in US$ out of which 2% have been
hedged to pesos. As a result, the amount of US$ debt swapped into pesos and pesodenominated debt accounts for approximately 86% of consolidated loans as of the end of 2009.
SEC Form 17A 2010
84
Below is the schedule of debt maturities for Globe for the years stated below based on total
outstanding debt as of 31 December 2009:
Year Due
Principal
*
(US$
Mn)
2010 ………………………………………………………………………………………………………
2011……………………………………………………………………………………………………….
2012……………………………………………………………………………………………………….
2013 ………………………………………………………………………………………………………
2014……………………………………………………………………………………………………….
2015 through 2016………………………………………………………………………………………
Total……………………………………………………………………………………………………….
166
172
313
183
148
45
1,027
* Principal amount before debt issuance costs.
On 10 February 2009, Globe Telecom announced it had signed an Underwriting Agreement with
lead underwriters BPI Capital Corporation, BDO Capital Corporation, and First Metro Investment
Corporation for a P3 Billion Corporate Bond Issuance. RCBC Capital Corporation and Vicsal
Investment, Inc. have been engaged for the issuance as co-lead underwriter and Participating
Underwriter, respectively. On 13 February 2009, Globe received approval from the SEC to issue
up to P10 Billion in aggregate principal amount of debt securities, with an initial tranche offer of up
to P5 billion comprised of fixed rate bonds due 2012 and 2014. Following the strong investor
demand from the initial issue size of P3 billion, Globe issued the full principal amount of P5.0
billion on 25 February 2009 in 3-year and 5-year bonds. On 27 March 2009, Globe signed a
P1.0 billion Term Loan Facility with Land Bank of the Philippines (LBP) as lender. Proceeds from
the bond issue and the LBP facility will be used to fund the Company’s capital expenditure
program.
On 28 April 2009, Globe signed a US$50 million loan agreement with Export Development
Canada (EDC) as lender of which proceeds will be used to fund capital expenditure purchases
from Nokia Siemens Networks.
On 31 July 2009, Globe signed a US$75 million loan agreement with Citibank N.A., Deutsche
Investitions und Entwicklungsgesellschaft, and Nederlandse Financierings-Maatschappij Voor
Ontwikkelingslanden. Proceeds will likewise be used to fund capital expenditures.
Stockholders’ equity for the current period was P47,709 million as of end of 2009 compared to the
P50,092 million registered in 2008.
As of 31 December 2009, Globe’s capital stock consists of:
Preferred Shares
Preferred stock Series “A” 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 “Series A” has the following features:
a. Convertible to one common share after 10 years from issue date at a price which shall not
be less than the prevailing market price of the common stock less the par value of the
preferred shares;
b. Cumulative and non-participating;
c. Floating rate dividend;
d. Issued at par;
e. Voting rights;
f. Globe has the right to redeem the preferred shares at par plus accrued dividends at any
time after 5 years from date of issuance; and
g. Preferences as to dividend in the event of liquidation.
The dividends for preferred shares are declared upon the sole discretion of the Globe Telecom
Board of Directors.
SEC Form 17A 2010
85
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
semi-annually 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% and declared a special dividend of P
= 50.00 per common share based on
shareholders on record as of November 20, 2009 with the payment date of December 15, 2009.
On February 4, 2010, the Board of Directors approved the declaration of the first semi-annual
cash dividend of P
= 40.00 per common share, payable to shareholders on record as of February
19, 2010. Total dividends of P
= 5,293.84 million were paid on March 15, 2010.
Consolidated Return on Average Equity (ROE) registered at the 26% level in 2009 compared to
the 21% in 2008 using net income and based on average equity balances for the year ended.
SEC Form 17A 2010
86
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 were at 29% of total service revenues for the periods ended 31 December 2009
and 2008, respectively. In contrast, Globe’s foreign-currency linked expenses were 11% and 13%
out of total operating expenses for the same periods ended, respectively.
The US$ flows are as follows:
2009
US$ and US$ Linked Revenues
US$ Operating Expenses
US$ Net Interest Expense
P17.9 billion
P2.7billion
P0.17 billion
Due to these net US$ inflows, a depreciation of the Peso has a positive impact on Globe’s Peso
EBITDA. Globe occasionally enters into forward contracts to hedge against a peso appreciation.
No forward sales contracts were outstanding as of end December 2009.
Realized losses from forward contracts that matured in 2009 amounted to P42 million. Since
these forwards are economic hedges, there are matching underlying exposures that offset the
value of the forwards.
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
December 2009
US$96 million
US$303 million
US$207 million
For accounting purposes, the foreign currency assets and liabilities are revalued at the current
exchange rate at the end of each reporting period. Given the net US$ liability position, a
depreciation of the peso results in a revaluation or forex loss in its P&L. As of December 2009,
the Philippine Peso stood at P46.425 to the US dollar, a 3% appreciation versus the 2008 yearend rate of P47.655. Due to the strengthening of the Peso, the Globe Group charged a total of
P287 million in net foreign exchange gains to current operations for the year ended December
2009.
Prior to 2004, the company entered into long term currency swap agreements to hedge the
currency exposure on its liabilities. As of end-December 2009, the Company has only one such
remaining agreement, with a notional amount of US$2.5 million.
The Company also has US$20 million in forward US$ purchase contracts to cover US$
obligations, with maturities up to October 2010. The average rate of the forward contract is
P47.975. Lastly, Globe has US$20 million in forward US$ sales contracts to cover a portion of its
US$ assets. These contracts will mature in October 2010 at an average forward rate of P48.208.
The swap and forward contracts are not designated as hedges for accounting purposes (please
refer to Notes 28.3 and 28.5 of the attached Notes to Financial Statements). As such, the MTM
of the contracts have flowed through the P&L, and future changes to the MTM of the contracts will
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also be charged to P&L every period. The MTM of the outstanding contracts amounts to a loss of
P22 million as of end-December 2009.
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 December 2009, Globe has a total of US$61 million in interest rate swap contracts that
were entered into to achieve these targets (please refer to Notes 28.3 to 28.5 of the attached
Notes to the Financial Statements). US$56 million of the total interest rate swaps are US$ swaps
under which the Company effectively swapped some of its floating US$ denominated loans into
fixed rate, with semi-annual payment intervals up to April 2012. We also have US$5 million in
notional amount of US$ swaps under which the Company receives a fixed rate of 9.75% and pays
a floating rate based on LIBOR, subject to a cap. The payments on the swap are subject to the
performance of 10 and 30 year US$ interest rates.
As of end of December 2009, 45% of peso debt is fixed, while 34% of USD debt is fixed after
swaps.
The MTM of the interest rate swap contracts stood at a loss of P22 million as of end December.
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
tem bank and SDA deposits.
The Globe Group also does not have any investments or hedging transactions with investment
banks. Derivative transactions as of end-December are with large, investment grade commercial
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. (Please refer to Note 28.2.3 of attached Notes to the Financial
Statements for additional information on active and inactive markets)
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 December 2009, the MTM value of the derivatives of the
Globe Group amounted to a loss of P56 million while loss on derivative instruments arising from
changes in MTM reflected in the consolidated income statements amounted to P65.41 million.
(Please refer to Note 22 and Note 28.4 of the attached Notes to Financial Statements for
gains/losses of preceding periods).
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. (Please
refer to attached Notes 28.2.1.1 and 28.2.1.2 of the Financial Statements for the sensitivity
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analysis results.) 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.
Legal and Corporate Developments
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 December 7 which imposed a three-tiered rate structure with a mandated flagdown of Php 3.00, a rate of Php 0.4375 for the 13th to the 60th second of the first minute and Php
0.65 for every 6-second pulse thereafter. On December 9 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 December 7, 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 and Sun 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.
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
December 7, 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 December 7 Order. Management has no estimate of what amount this could be at this
time.
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 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 Court of Appeals
ordered the reinstatement of the case and has forwarded it to the NTC-Olongapo for trial.
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
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been set for further hearings. PLDT has filed a Motion for Reconsideration and Globe has
intervened in this case.
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.
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 counteraffidavits and are currently pending before the Prosecutor’s Office of Pasig.
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ANNEX TO THE 2009 MD&A SECTION
1. Events that will trigger direct or contingent financial obligations that are material to the
Company including any default or acceleration of an obligation:
Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous financial year except
for the adoption of the following new and amended PFRS and Philippine Interpretations of
International Financial Reporting Interpretations Committee (IFRIC) which became effective on
January 1, 2009. Except as otherwise indicated, the adoption of the new and amended
Standards and Interpretations did not have a significant impact on the consolidated financial
statements.
•
Amendments to PAS 1, Presentation of Financial Statements
In accordance with the Amendments to PAS 1, the statement of changes in equity shall
include only transactions with owners, while all non-owner changes will be presented in equity
as a single line with details included in a separate statement. Owners are defined as holders
of instruments classified as equity.
In addition, the Amendments to PAS 1 provide for the introduction of a new statement of
comprehensive income that combines all items of income and expenses recognized in the
profit or loss together with “Other comprehensive income”. Entities may choose to present all
items in one statement, or to present two linked statements, a separate statement of income
and a statement of comprehensive income. These Amendments also require enhancements
in the presentation of the consolidated statements of financial position and owner’s equity as
well as additional disclosures to be included in the financial statements. Adoption of these
Amendments resulted in the following: (a) change in the title from consolidated balance sheet
to consolidated statements of financial position; (b) change in the presentation of changes in
equity and of comprehensive income, i.e., non-owner changes in equity are now presented in
one consolidated statement of comprehensive income; and (c) additional disclosures in the
notes to the consolidated financial statements relating to the movement in and income tax
effects of other reserves (see Note 17 of the 2009 Financial Statements).
•
Amendment to PAS 23, Borrowing Costs
This Amendment requires the capitalization of borrowing costs when such costs relate to a
qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale. Accordingly, borrowing costs are capitalized on
qualifying assets with a commencement date after January 1, 2009. No changes will be
made for borrowing costs incurred to this date that have been expensed.
•
PFRS 8, Operating Segments
It replaces PAS 14, Segment Reporting, and adopts a full management approach to
identifying, measuring and disclosing the results of an entity’s operating segments. The
information reported would be that which management uses internally for evaluating the
performance of operating segments and allocating resources to those segments. Such
information may be different from that reported in the consolidated statements of financial
position and consolidated statements of comprehensive income and the Globe Group will
provide explanations and reconciliations of the differences. This Standard is only applicable
to an entity that has debt or equity instruments that are traded in a public market or that files
(or is in the process of filing) its financial statements with a securities commission or similar
party. The Globe Group has enhanced its current manner of reporting segment information to
include additional information used by management internally (see Note 29 of the 2009
Financial Statements). Segment information for prior years was restated to include the
additional information.
•
Philippine Interpretation IFRIC 16, Hedges of a Net Investment in a Foreign Operation
This Interpretation provides guidance on identifying foreign currency risks that qualify for
hedge accounting in the hedge of net investment; where within the group the hedging
instrument can be held as a hedge of a net investment; and how an entity should determine
the amount of foreign currency gains or losses, relating to both the net investment and the
hedging instrument, to be recycled on disposal of the net investment.
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•
PFRS 1, First-time Adoption of Philippine Financial Reporting Standards - Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or Associate
The amended PFRS 1 allows an entity to determine the ‘cost’ of investments in subsidiaries,
jointly controlled entities or associates in its opening PFRS financial statements in
accordance with PAS 27, Consolidated and Separate Financial Statements, or using a
deemed cost method. The amendment to PAS 27 required all dividends from a subsidiary,
jointly controlled entity or associate to be recognized in the statements of comprehensive
income in the separate financial statement.
•
PFRS 2, Share-based Payment - Vesting Condition and Cancellations
This Standard has been revised to clarify the definition of a vesting condition and prescribes
the treatment for an award that is effectively cancelled. It defines a vesting condition as a
condition that includes an explicit or implicit requirement to provide services. It further
requires non-vesting conditions to be treated in a similar fashion to market conditions. Failure
to satisfy a non-vesting condition that is within the control of either the entity or the
counterparty is accounted for as cancellation. However, failure to satisfy a non-vesting
condition that is beyond the control of either party does not give rise to a cancellation.
•
Amendments to PFRS 7, Financial Instruments: Disclosures - Improving Disclosures about
Financial Instruments
The amendments to PFRS 7 introduce enhanced disclosures about fair value measurement
and liquidity risk. The amendments to PFRS 7 require fair value measurements for each
class of financial instruments to be disclosed by the source of inputs, using the following
three-level hierarchy: (a) quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1); (b) inputs other than quoted prices included in Level 1 that are observable
for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2);
and (c) inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3). The level within which the fair value measurement is
categorized must be based on the lowest level of input to the instrument’s valuation that is
significant to the fair value measurement in its entirety.
Additional disclosures required in the amendments to PFRS 7 are shown in Note 28 - Capital
and Risk Management and Financial Instruments of the attached 2009 Financial Statements.
The amendments to PFRS 7 also introduce two major changes in liquidity risk disclosures as
follows: (a) exclusion of derivative liabilities from maturity analysis unless the contractual
maturities are essential for an understanding of the timing of the cash flows and (b) inclusion
of financial guarantee contracts in the contractual maturity analysis based on the maximum
amount guaranteed.
•
Amendments to PAS 32, Financial Instruments: Presentation, and PAS 1, Presentation of
Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation
These Amendments specify, among others, that puttable financial instruments will be
classified as equity if they have all of the following specified features: (a) the instrument
entitles the holder to require the entity to repurchase or redeem the instrument (either on an
ongoing basis or on liquidation) for a pro rata share of the entity’s net assets; (b) the
instrument is in the most subordinate class of instruments, with no priority over other claims to
the assets of the entity on liquidation; (c) all instruments in the subordinate class have
identical features; (d) the instrument does not include any contractual obligation to pay cash
or financial assets other than the holder’s right to a pro rata share of the entity’s net assets;
and (e) the total expected cash flows attributable to the instrument over its life are based
substantially on the profit or loss, a change in recognized net assets, or a change in the fair
value of the recognized and unrecognized net assets of the entity over the life of the
instrument.
•
Philippine Interpretation IFRIC-9 and PAS 39 Amendments - Embedded Derivatives
This Amendment to Philippine Interpretation IFRIC-9, Reassessment of Embedded
Derivatives, requires an entity to assess whether an embedded derivative must be separated
from a host contract when the entity reclassifies a hybrid financial asset out of the fair value
through profit or loss category. This assessment is to be made based on circumstances that
existed on the later of the date the entity first became a party to the contract and the date of
any contract amendments that significantly change the cash flows of the contract. PAS 39,
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Financial Instruments: Recognition and Measurement, now states that if an embedded
derivative cannot be reliably measured, the entire hybrid instrument must remain classified as
at fair value through profit or loss.
Improvements to PFRS
In May 2008 and April 2009, the International Accounting Standards Board (IASB) issued
omnibus amendments to certain standards, primarily with a view to removing inconsistencies and
clarifying wordings. There are separate transitional provisions for each standard. The adoption
of these amended standards did not have any significant impact on the consolidated financial
statements of the Globe Group, unless otherwise indicated.
•
PAS 18, Revenue
The Amendment adds guidance (which accompanies the Standard) to determine whether an
entity is acting as a principal or as an agent. The features to consider are whether the entity
(a) has primary responsibility for providing the goods or service; (b) has inventory risk; (c) has
discretion in establishing prices; and (d) bears the credit risk. The Group assessed its
revenue arrangements against these criteria and concluded that it is acting as principal in
some arrangements and as an agent in other arrangements.
•
PAS 1, Presentation of Financial Statements
Assets and liabilities classified as held for trading are not automatically classified as current in
the consolidated statements of financial position.
•
PAS 16, Property, Plant and Equipment
The Amendment replaces the term ‘net selling price’ with ‘fair value less costs to sell’, to be
consistent with PFRS 5, Non-current Assets Held for Sale and Discontinued Operations, and
PAS 36, Impairment of Asset.
In addition, items of property, plant and equipment held for rental that are routinely sold in the
ordinary course of business after rental, are transferred to inventory when rental ceases and
they are held for sale. Proceeds of such sales are subsequently shown as revenue. Cash
payments on initial recognition of such items, the cash receipts from rents and subsequent
sales are all shown as cash flows from operating activities.
•
PAS 19, Employee Benefits
It revises the definition of: (a) “past service costs” to include reductions in benefits related to
past services (“negative past service costs”) and to exclude reductions in benefits related to
future services that arise from plan amendments. Amendments to plans that result in a
reduction in benefits related to future services are accounted for as a curtailment, (b) “return
on plan assets” to exclude plan administration costs if they have already been included in the
actuarial assumptions used to measure the defined benefit obligation, and (c) “short-term”
and “other long-term” employee benefits to focus on the point in time at which the liability is
due to be settled. Also, it deletes the reference to the recognition of contingent liabilities to
ensure consistency with PAS 37, Provisions, Contingent Liabilities and Contingent Assets.
•
PAS 23, Borrowing Costs
This revises the definition of borrowing costs to consolidate the types of items that are
considered components of ‘borrowing costs’, i.e., components of the interest expense
calculated using the effective interest rate method.
•
PAS 28, Investment in Associates
If an associate is accounted for at fair value in accordance with PAS 39, only the requirement
of PAS 28 to disclose the nature and extent of any significant restrictions on the ability of the
associate to transfer funds to the entity in the form of cash or repayment of loans applies.
Also, an investment in an associate is a single asset for the purpose of conducting the
impairment test. Therefore, there is no separate allocation to the goodwill included in the
investment balance.
•
PAS 31, Interests in Joint Ventures
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If a joint venture is accounted for at fair value in accordance with PAS 39, only the
requirements of PAS 31 to disclose the commitments of the venturer and the joint venture, as
well as summary of financial information about the assets, liabilities, income and expenses
will apply.
•
PAS 36, Impairment of Assets
When discounted cash flows are used to estimate “fair value less cost to sell” additional
disclosure is required about the discount rate, consistent with disclosures required when the
discounted cash flows are used to estimate “value in use”.
•
PAS 38, Intangible Assets
Expenditure on advertising and promotional activities is recognized as an expense when the
Group either has the right to access the goods or has received the services.
•
PAS 39, Financial Instruments: Recognition and Measurement
Improvements to PAS 39 are: (a) changes in circumstances relating to derivatives specifically derivatives designated or de-designated as hedging instruments after initial
recognition - are not reclassifications; (b) when financial assets are reclassified as a result of
an insurance company changing its accounting policy in accordance with paragraph 45 of
PFRS 4, Insurance Contracts, this is a change in circumstance, not a reclassification; (c)
removes the reference to a “segment” when determining whether an instrument qualifies as a
hedge; and (d) requires use of the revised effective interest rate (rather than the original
effective interest rate) when re-measuring a debt instrument on the cessation of fair value
hedge accounting.
•
PAS 40, Investment Properties
It revises the scope (and the scope of PAS 16) to include property that is being constructed or
developed for future use as an investment property. Where an entity is unable to determine
the fair value of an investment property under construction, but expects to be able to
determine its fair value on completion, the investment under construction will be measured at
cost until such time as fair value can be determined or construction is complete.
Future Changes in Accounting Policies
The Globe Group will adopt the following standards and interpretations enumerated below when
these become effective. Except as otherwise indicated, the Globe Group does not expect the
adoption of these new and amended PFRS and Philippine Interpretations to have significant
impact on the consolidated financial statements.
•
Revised PFRS 3, Business Combinations and PAS 27, Consolidated and Separate Financial
Statements
The revised standards are effective for annual periods beginning on or after July 1, 2009. The
revised PFRS 3 introduces a number of changes in the accounting for business combinations
that will impact the amount of goodwill recognized, the reported results in the period that an
acquisition occurs, and future reported results. The revised PAS 27 requires, among others,
that (a) change in ownership interests of a subsidiary (that do not result in loss of control) will
be accounted for as an equity transaction and will have no impact on goodwill nor will it give
rise to a gain or loss; (b) losses incurred by the subsidiary will be allocated between the
controlling and non-controlling interests (previously referred to as ‘minority interests’), even if
the losses exceed the non-controlling equity investment in the subsidiary; and (c) on loss of
control of a subsidiary, any retained interest will be remeasured to fair value and this will
impact the gain or loss recognized on disposal.
The changes introduced by the revised PFRS 3 must be applied prospectively, while changes
introduced by the revised PAS 27 must be applied retrospectively with a few exceptions. The
changes will affect future acquisitions and transactions with non-controlling interests.
•
Philippine Interpretation IFRIC 15, Agreement for Construction of Real Estate
This Interpretation, which will be effective January 1, 2012, covers accounting for revenue
and associated expenses by entities that undertake the construction of real estate directly or
through subcontractors. This Interpretation requires that revenue on construction of real
estate be recognized only upon completion, except when such contract qualifies as
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construction contract to be accounted for under PAS 11, Construction Contracts, or involves
rendering of services in which case revenue is recognized based on stage of completion.
Contracts involving provision of services with the construction materials and where the risks
and reward of ownership are transferred to the buyer on a continuous basis, will also be
accounted for based on stage of completion. This Interpretation will not be applicable to the
Globe Group.
•
Philippine Interpretation IFRIC 17, Distributions of Non-cash Assets to Owners
This Interpretation provides guidance on non-reciprocal distribution of assets by an entity to
its owners acting in their capacity as owners, including distributions of non-cash assets and
those giving the shareholders a choice of receiving non-cash assets or cash, provided that:
(a) all owners of the same class of equity instruments are treated equally; and (b) the noncash assets distributed are not ultimately controlled by the same party or parties both before
and after the distribution, and as such, excluding transactions under common control. This
Interpretation is applied prospectively and is applicable for annual periods beginning on or
after July 1, 2009 with early application permitted.
•
Amendment to PAS 39, Financial Instruments: Recognition and Measurement Eligible
Hedged Items
This Amendment, which will be effective for annual periods beginning on or after
July 1, 2009, addresses only the designation of a one-sided risk in a hedged item, and the
designation of inflation as a hedged risk or portion in particular situations. The Amendment
clarifies that an entity is permitted to designate a portion of the fair value changes or cash
flow variability of a financial instrument as a hedged item. The Globe Group will assess the
impact of this Amendment on its current manner of accounting for hedged items.
•
Amendments to PFRS 2, Share-based Payment: Group Cash-settled Transactions
The IASB amended the IFRS 2 to clarify its scope and the accounting for group cash-settled
share-based payment transactions in the separate or individual financial statement of the
entity receiving the goods or services when that entity has no obligation to settle the sharebased payment transaction. This Amendment is effective January 1, 2010. It supersedes
IFRIC 8, Scope of IFRS 2 and IFRIC 11, IFRIC 2 - Group and Treasury Share Transactions.
•
Philippine Interpretation IFRIC 18, Transfer of Assets from Customers
This Interpretation is to be applied prospectively to transfers of assets from customers
received on or after July 1, 2009. The Interpretation provides guidance on how to account for
items of property, plant and equipment received from customers or cash that is received and
used to acquire or construct assets that are used to connect the customer to a network or to
provide ongoing access to a supply of goods or services or both. When the transferred item
meets the definition of an asset, the asset is measured at fair value on initial recognition as
part of an exchange transaction. The service(s) delivered are identified and the consideration
received (the fair value of the asset) allocated to each identifiable service. Revenue is
recognized as each service is delivered by the entity.
Improvements to PFRS
The omnibus amendments to PFRSs issued in 2009 were issued primarily with a view to
removing inconsistencies and clarifying wordings. There are separate transitional provisions for
each standard and will become effective January 1, 2010. Except otherwise stated, the Globe
Group does not except the adoption of these new standards to have significant impact on the
consolidated financial statements.
•
PFRS 2, Share-based Payment
This Amendment clarifies that the contribution of a business on formation of a joint venture
and combinations under common control are not within the scope of PFRS 2 even though
they are out of scope of PFRS 3. The amendment is effective for financial years on or after
July 1, 2009.
•
PFRS 5, Non-current Assets Held for Sale and Discontinued Operations
This Amendment clarifies that the disclosures required in respect of non-current assets and
disposal groups classified as held for sale or discontinued operations are only those set out in
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PFRS 5. The disclosure requirements of other PFRSs only apply if specifically required for
such non-current assets or discontinued operations.
•
PFRS 8, Operating Segments
The Amendment clarifies that segment assets and liabilities need only be reported when
those assets and liabilities are included in measures that are used by the chief operating
decision maker.
•
PAS 1, Presentation of Financial Statements
The Amendment clarifies that the terms of a liability that could result, at anytime, in its
settlement by the issuance of equity instruments at the option of the counterparty do not
affect its classification.
•
PAS 7, Statement of Cash Flows
This Amendment explicitly states that only expenditure that results in a recognized asset can
be classified as a cash flow from investing activities.
•
PAS 17, Leases
Removes the specific guidance on classifying land as a lease. Prior to the amendment,
leases of land were classified as operating leases. The Amendment now requires that leases
of land are classified as either ‘finance’ or ‘operating’ in accordance with the general
principles of PAS 17. The amendments will be applied retrospectively.
•
PAS 36, Impairment of Assets
This Amendment clarifies that the largest unit permitted for allocating goodwill, acquired in a
business combination, is the operating segment as defined in PFRS 8 before aggregation for
reporting purposes.
•
PAS 38, Intangible Assets
This Amendment clarifies that if an intangible asset acquired in a business combination is
identifiable only with another intangible asset, the acquirer may recognize the group of
intangible assets as a single asset provided the individual assets have similar useful lives.
Also clarifies that the valuation techniques presented for determining the fair value of
intangible assets acquired in a business combination that are not traded in active markets are
only examples and are not restrictive on the methods that can be used.
•
PAS 39, Financial Instruments: Recognition and Measurement
This Amendment clarifies the following: 1) that a prepayment option is considered closely
related to the host contract when the exercise price of a prepayment option reimburses the
lender up to the approximate present value of lost interest for the remaining term of the host
contract; 2) that the scope exemption for contracts between an acquirer and a vendor in a
business combination to buy or sell an acquiree at a future date applies only to binding
forward contracts, and not derivative contracts where further actions by either party are still to
be taken and 3) that gains or losses on cash flow hedges of a forecast transaction that
subsequently results in the recognition of a financial instrument or on cash flow hedges of
recognized financial instruments should be reclassified in the period that the hedged forecast
cash flows affect profit or loss.
•
Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives
This Interpretation clarifies that it does not apply to possible reassessment, at the date of
acquisition, to embedded derivatives in contracts acquired in a combination between entities
or businesses under common control or the formation of a joint venture.
•
Philippine Interpretation IFRIC 16, Hedges of a Net Investment in a Foreign Operation
This Interpretation states that, in a hedge of a net investment in a foreign operation, qualifying
hedging instruments may be held by any entity or entities within the group, including the
foreign operation itself, as long as the designation, documentation and effectiveness
requirements of PAS 39 that relate to a net investment hedge are satisfied.
SEC Form 17A 2010
96
2. Causes of any material change from period to period of FS: (As of December 31, 2009)
Assets
Current
a) Cash and Cash Equivalents – Increased by P157.70 million mainly due to higher cash
provided by operating activities.
b) Short term investments and Held to maturity investments – Increased by P2.78 million due to
investments in special and time deposit accounts coming from excess operating cash flows.
c) Receivables-net – Decreased by P890.12 million primarily due to lower traffic settlements
receivable from various carriers and collections on aged accounts during the intervening
period.
d) Inventories and Supplies - Increased by P529.43 million due to higher inventory of devices,
modem and other accessories as of December 31, 2009.
e) Derivative Assets – Decreased by P132.71 million due to maturities of forward contracts
during the intervening period.
f) Prepayments and other current assets - Decreased by 18% or P907.11 million significantly
due to the application of advances of various contractors and suppliers to progress billings
and the maturity of a short term loan receivable.
Noncurrent
a) Property and Equipment – net - Increased by P8.15 billion due to the additional costs incurred
b)
c)
d)
e)
f)
for the expansion of network assets reduced partly by depreciation of assets during the
intervening period.
Investment Property – net - Down by P22.48 million due to depreciation of investment
properties.
Intangible assets and goodwill – net - Down by P355.94 million due to amortization, partly
cushioned by additional costs incurred for telecommunication equipment software licenses
and other VAS software applications.
Investments in Joint Venture – Up by P160.27 million due largely to the additional investment
in BPI Globe BanKO amounting to P141.3 million and translation gains on the investment in
BMPL.
Deferred Income Tax - net – Up by P218.82 million mainly due to deferred tax on NOLCO
and MCIT of subsidiaries.
Other Noncurrent Assets – Up by P978.21 million due to long term loan receivables from
Globe retirement fund and Bethlehem Holdings totaling to P1.26 billion.
Liabilities
Current
a) Accounts payable and Accrued Expenses – Increased by 22% or P3.81 billion primarily due
to higher project accruals relative to the network expansion, higher traffic settlement payable
and final withholding taxes payable.
b) Provisions – Decreased by P113.11 million due to the reversal of provisions for probable
regulatory claims and assessments resulting from favorable developments.
c) Derivative Liabilities – Net decrease of P78.12 million mainly due to maturities of hedged
revenue forwards as it matured during the intervening period.
d) Income Taxes Payable – Down by 11% or P130.25 million mainly due to the favorable impact
of lower corporate tax rate by 5% in 2009.
e) Unearned Revenues – Down by 8% or P265.83 million primarily due to faster conversion of
prepaid credits sold to dealers to usage revenues.
f) Notes Payable – availment of short term loans to finance working capital requirements.
Noncurrent
a) Deferred Tax Liabilities – Increased by P36.87 million attributed to higher deferred tax liability
from unrealized forex gain.
b) Long-term Debt (current and noncurrent) – Increased by P8.89 billion due to various
borrowings to finance capital expenditures offset by repayments to foreign and local creditors
during the intervening period.
c) Derivative Liabilities – Down by P15.08 million due to lower MTM loss values of cash flow
hedge interest rate swaps designated as cash flow hedges.
SEC Form 17A 2010
97
d) Other Long-term Liabilities (current and noncurrent) – Increased by P145.54 million primarily
due to asset retirement obligation (ARO) accretion net of adjustments and new ARO incurred
during the intervening period
Equity
a) Paid-up Capital – Up by P50.76 million attributed to the issuance of Globe shares due to
exercised stock options during the intervening period.
b) Cost of Share-Based Payments – Increased by P81.46 million due to additional
compensation expense partly reduced by the value of the stock options exercised during the
intervening period.
c) Cumulative Translation Adjustment – Changes due to maturity of forwards designated as
revenue hedges and exchange differences arising from translation of foreign investments
during the intervening period.
d) Retained Earnings – Decreased by 16% or P2.57 billion due to dividends declared to
common and preferred shareholders amounting to P15.14 billion over net income of P12.57
billion during the intervening period.
3. 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 10 and 11 in the attached
2009 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, joints ventures and certain related parties. These
transactions, which are accounted for at market prices are normally charged to unaffiliated
customers for similar goods and services.
Globe Telecom also has investments in joint ventures including:
•
Investment in BPI Globe BanKO Inc., A Savings Bank (BPI Globe BanKO) - On July 17,
2009, Globe acquired a 40% stake in BPI Globe BanKO (formerly Pilipinas Savings Bank,
Inc. or PS Bank) for P
= 141.33 million, pursuant to a Shareholder Agreement with Bank of the
Philippine Islands (BPI), AC and PS Bank, and a Deed of Absolute Sale with BPI. BPI Globe
BanKO will have the capability to provide services to micro-finance institutions and retail
clients through mobile and related technology.
•
Investment in Bridge Mobile Pte. Ltd. (BMPL) - Globe Telecom and other leading Asia Pacific
mobile operators (JV partners) signed an Agreement in 2004 (JV Agreement) to form a
regional mobile alliance, which will operate through a Singapore-incorporated company,
BMPL. The joint venture company is a commercial vehicle for the JV partners to build and
establish a regional mobile infrastructure and common service platform and deliver different
regional mobile services to their subscribers. The other joint venture partners with equal stake
in the alliance include Bharti Tele-Ventures Limited, Maxis Communications Berhad, Optus
Mobile Pty. Limited, Singapore Telecom Mobile Pte. Ltd., Taiwan Cellular Corporation, PT
Telekomunikasi Selular and Hongkong 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,
2009, Globe Telecom has invested a total of USD2.20 million in the joint venture.
•
In 2008 and 2009, the Globe Group granted loans to the Globe Telecom retirement fund and
BHI (Bethlehem Holdings, Inc.). The Globe Telecom retirement fund established BHI in 2009
to invest in media ventures. For details, please refer to Note 11 of the 2009 Notes to the
Financial Statements.
4. Seasonal Aspects that have a material effect on the FS
No seasonal aspects that have a material effect on the financial statements.
SEC Form 17A 2010
98
Item 7. Financial Statements
The consolidated financial statements and supplementary schedules of the Company are
incorporated herein in the accompanying Index to Exhibits on page 133 of this Form 17A.
SEC Form 17A 2010
99
PART III- CONTROL AND COMPENSATION INFORMATION
Item 8. Directors and Key Officers
A. Board of Directors (as of December 31, 2010)
Name
Jaime Augusto Zobel de Ayala
Gerardo C. Ablaza, Jr.
Hui Weng Cheong 1
Romeo L. Bernardo
Ernest L. Cu
Roberto F. de Ocampo
Koh Kah Sek 2
Delfin L. Lazaro
Xavier P. Loinaz
Guillermo D. Luchangco
Fernando Zobel de Ayala
1
2
Position
Chairman
Co-Vice Chairman
Co-Vice Chairman
Director
Director, President and Chief Executive Officer
Director
Director
Director
Independent Director
Independent Director
Director
Replaced Mark Chong Chin Kok after being elected by the Board during its 8 October 2010 meeting.
Tay Soo Meng replaced Koh Kah Sek after being elected by the Board during its 8 February 2011 meeting.
Jaime Augusto Zobel de Ayala. Mr. Zobel, 51, Filipino, has served as Chairman of the Board
since 1997 and a Director since 1989. He serves as Chairman of the Board of Directors and
Chief Executive Officer of Ayala Corporation; Chairman of the Board of Directors of Bank of the
Philippine Islands and Integrated Micro-Electronics, Inc.; Vice Chairman of Ayala Land, Inc. and
Manila Water Co., Inc.; Co-Vice Chairman of Mermac, Inc., and the Ayala Foundation; Director of
BPI PHILAM Life Assurance Corp., Alabang Commercial Corporation, Ayala International Pte
Ltd., and Ayala Hotels, Inc.; Member of the Mitsubishi Corporation International Advisory
Committee, JP Morgan International Council, and Toshiba International Advisory Group;
Chairman of Harvard Business School Asia-Pacific Advisory Board, Member of Harvard
University Asia Center Advisory Committee, Member of the Board of Trustees of the Eisenhower
Fellowships, the Singapore Management University and Asian Institute of Management; Member
of the Asia Business Council, The Asia Society, the International Business Council of the World
Economic Forum; Chairman of the World Wildlife Fund Philippine Advisory Council, Vice
Chairman of Asia Society Philippines Foundation, Inc., Co-Vice Chair of the Makati Business
Club, Asia Society Philippines Foundation, Inc., and Member of the Board of Trustees of the
Children’s Hour Philippines, Inc. He was also a TOYM (Ten Outstanding Young Men) Awardee in
1999 and was named Management Man of the Year in 2006 by the Management Association of
the Philippines. He was also recognized as the Emerging Markets CEO of the Year (1998);
Harvard Business School Alumni Achievement Awardee (2007); Presidential Medal of Merit
(2009); and Outstanding Manilan (2009).
Gerardo C. Ablaza, Jr. Mr. Ablaza, 57, Filipino, has served as Director since 1998. Mr. Ablaza
is a Senior Managing Director of Ayala Corporation and a member of the Ayala Group
Management Committee, a post he has held since 1998. He is a Director of Bank of the
Philippine Islands, BPI Family Savings Bank, BPI Card Finance Corporation, Azalea International
Venture Partners Limited, Asiacom Philippines, Inc., Manila Water Company, LiveIT Investment
Ltd., BPI Globe BanKo Inc. and Ayala Foundation Inc. Mr. Ablaza is currently President and
Chief Executive Officer of Manila Water Company, Inc. Prior to this position, he served as Chief
Executive Officer of AC Capital with directorship positions in Azalea Technology Investments, Inc.
HRMall Holdings Limited, Integreon, Inc., Affinity Express Holdings Limited, NewBridge
International Investments Ltd., Stream Global Services., RETC Renewable Energy Test Center.,
ACST Business Holdings, Inc. AG Holdings Limited (HK), Ayala Automotive Holdings
Corporation, Ayala Aviation Corporation, Michigan Power, Inc., MPM Noodles Corporation,
Northern Waterworks and Rivers of Cebu Inc, Purefoods International Investment Limited. He
was President and Chief Executive Officer of Globe Telecom, Inc. from 1998 to April 2009. Mr.
Ablaza was previously Vice-President and Country Business Manager for the Philippines and
Guam of Citibank, N.A. for its global consumer banking business. Prior to this position, he was
Vice-President for consumer banking of Citibank, N.A. Singapore. Attendant to his last position in
Citibank, N.A., he was the bank’s representative to the Board of Directors of City Trust Banking
Corporation and its various subsidiaries. Mr. Ablaza graduated summa cum laude from De La
Salle University in 1974 with an AB degree major in Mathematics (Honors Program). He was the
SEC Form 17A 2010
100
first Filipino to win CNBC’s Asia Business Leader of the Year in 2004, and was also awarded by
Telecom Asia as the Best Asian Telecom CEO in the same year.
Hui Weng Cheong. Mr Hui, 56, Singaporean, was appointed as Director on 8 October 2010. Mr
Hui has over 30 years of experience with the Singapore Telecom Group and has held various
management roles in various positions. Starting out his career as an Engineer, he spent 10 years
in the Teleview Division, moving from system development to managing the Planning and
Support Department. In 1995, he was posted to Thailand as the Managing Director of Shinawatra
Paging, before returning to Singapore in 1999 to take on the role of VP (Consumer Products) to
manage the product development of all new mobile, paging, internet, broadband and telephone
business. He also held the post of COO with SingTel Group’s Thai associate, Advanced Info
Service, and was responsible for sales and marketing, network operations, IT solutions, and
customer and services management. He is currently the SingTel CEO International since 1
December 2010. Mr. Hui graduated with First Class Honors in Electrical Engineering from the
National University of Singapore in 1980, and obtained his Master of Business Administration
from the International Business Education and Research Program at the University of Southern
California, USA in 1992.
Romeo L. Bernardo. Mr. Bernardo, 56, Filipino, has served as Director since 2001. He is
Managing Director of Lazaro Bernardo Tiu and Associates (LBT), a boutique financial advisory
firm based in Manila. He is also GlobalSource economist in the Philippines. He does World Bank
and Asian Development Bank-funded policy advisory work, Chairman of ALFM Family of Funds
and Philippine Stock Index Fund. He is likewise a Director of several companies and
organizations including Aboitiz Power, BPI, RFM Corporation, Philippine Investment
Management, Inc. (PHINMA), Philippine Institute for Development Studies (PIDS), BPI-Philam
Life Assurance Corporation (formerly known as Ayala Life Assurance, Inc.), National Reinsurance
Corporation of the Philippines and Institute for Development and Econometric Analysis. He
previously served as Undersecretary of Finance and as Alternate Executive Director of the Asian
Development Bank. He was an Advisor of the World Bank and the IMF (Washington D.C.), and
served as Deputy Chief of the Philippine Delegation to the GATT (WTO), Geneva. He was
formerly President of the Philippine Economics Society; Chairman of the Federation of ASEAN
Economic Societies and a Faculty Member (Finance) of the University of the Philippines. Mr.
Bernardo holds a degree in Bachelor of Science in Business Economics from the University of the
Philippines (magna cum laude) and a Masters degree in Development Economics at Williams
College (top of the class) from Williams College in Williamstown, Massachusetts.
Ernest L. Cu. Mr. Cu, 50, Filipino, is currently the President and Chief Executive Officer of Globe
Telecom. Mr. Cu has served as Director since 2009. He joined the Company on 1 October 2008
as Deputy CEO. He brings with him over two decades of general management and business
development experience spanning multi-country operations. Prior to joining Globe, he was the
President and Chief Executive Officer of SPI Technologies, Inc. Mr. Cu was the recipient of the
Ernst & Young ICT Entrepreneur of the Year award in 2003, and was recently adjudged Best
CEO by Finance Asia. He was also conferred the International Association of Business
Communicators’ (IABC) CEO EXCEL award for communication excellence in telecoms and IT,
and was voted as one of the Most Trusted Filipinos in a poll conducted by Reader’s Digest. Mr.
Cu earned his Bachelor of Science in Industrial Management Engineering from De La Salle
University in Manila, and his MBA from the J.L. Kellogg Graduate School of Management,
Northwestern University.
Roberto F. de Ocampo. Dr. de Ocampo, 65, Filipino, has served as Director since 2003. He is
currently the President of Philam Asset Management, Inc. Funds, and the Chairman of DFNN
International, Asian Aerospace, Inc., Eastbay Resorts,Inc., Stradcom Corporation and Stradcom
International Holdings, Inc., Tollways Association of the Philippines, MoneyTree Publishing
Corporation and Centennial Asia Advisors Pte. Ltd. He also serves as Vice Chairman of
Seaboard Eastern Insurance Company, Tranzen Group. Mr. de Ocampo is also a member of the
Board of Directors of several companies including – PHINMA Corporation, Benlife-PNB
Insurance, Thunderbird Resorts, AB Capital and Investment Corporation, Alaska Milk, Bankard,
EEI Corporation, House of Investments, Rizal Commercial Banking Corporation, Robinsons Land
Corporation, Salcon Power and United Overseas Bank. He is also on the Board of Advisers of
ARGOSY Fund, Inc., NAVIS Capital Partners and AES Corporation (Philippines) and is a member
of the Board of Trustees of Asian Institute of Management and Angeles University Foundation.
SEC Form 17A 2010
101
His other significant positions in civic organizations include being the Founding Director of the
Centennial Group Policy & Strategic Advisors (Washington, DC) and The Emerging Markets
Forum. He is currently an Advisory Board member of a number of important global institutions
including The Conference Board, the Trilateral Commission, and the BOAO Forum for Asia. He
currently serves as Chairman of the RFO Center for Public Finance and Regional Economic
Cooperation (an ADB Regional Knowledge Hub), Public Finance Institute of the Philippines and
the British Alumni Association. He was a former Secretary of Finance of the Republic of the
Philippines; Former Chairman and Chief Executive Officer of the Development Bank of the
Philippines; Recipient of Global Finance Minister of the Year, Asian Finance Minister of the Year,
Philippine Legion of Honor, Chevalier of the Legion of Honor of France, ADFIAP Man of the Year,
Ten Outstanding Young Men Award (TOYM), several Who’s Who Awards, and the 2006 Asian
HRD Award for Outstanding Contribution to Society. Dr. de Ocampo graduated from De La Salle
College and Ateneo de Manila University in Manila, received an MBA from the University of
Michigan, holds a post-graduate diploma from the London School of Economics, and has four
doctorate degrees (Honoris Causa).
Koh Kah Sek. Ms. Koh, Malaysian, 39, has served as Director since 2006. She is currently the
Group Treasurer of SingTel. She joined SingTel in March 2005 as Group Financial Controller.
Prior to joining SingTel, she was with Far East Organization – Yeo Hiap Seng Limited as Vice
President (Finance) responsible for the financial functions of the Singapore and US operations.
Prior to joining Far East Organization, she had spent a number of years in
PricewaterhouseCoopers and Goldman Sachs..
Delfin L. Lazaro. Mr. Lazaro, 64, Filipino, has served as Director since January 1997. He is a
member of the Management Committee of Ayala Corporation. His other significant positions
include: Chairman of Philwater Holdings Company, Inc., Atlas Fertilizer & Chemicals Inc.,
Chairman and President of Michigan Power, Inc., and A.C.S.T. Business Holdings, Inc.;
Chairman of Azalea Intl. Venture Partners, Ltd.; Director of Ayala Land, Inc., Integrated MicroElectronics, Inc., Manila Water Co., Inc., Ayala DBS Holdings, Inc., AYC Holdings, Ltd., Ayala
International Holdings, Ltd., Bestfull Holdings Limited, AG Holdings, AI North America, Inc., Probe
Productions, Inc. and Empire Insurance Company; and Trustee of Insular Life Assurance Co.,
Ltd. He was named Management Man of the Year 1999 by the Management Association of the
Philippines for his contribution to the conceptualization and implementation of the Philippine
Energy Development Plan and to the passage of the law creating the Department of Energy. He
was also cited for stabilizing the power situation that helped the country achieve successively
high growth levels up to the Asian crisis in 1997.
Xavier P. Loinaz. Mr. Loinaz, 67, Filipino, has served as Independent Director since 2009. He
was formerly the President of the Bank of the Philippine Islands (BPI). He currently holds the
following positions: Independent Director of BPI, BPI Capital Corporation, BPI Direct Savings
Bank, Inc., BPI/MS Insurance Corporation, BPI Family Savings Bank, Inc. and Ayala Corporation;
Member of the Board of Trustees of BPI Foundation, Inc. and E. Zobel Foundation; and Chairman
of the Board of Directors of Alay Kapwa Kilusan Pangkalusugan.
Guillermo D. Luchangco. Mr. Luchangco, 71, Filipino, has served as Independent Director
since 2001. He is also Chairman and Chief Executive Officer of various companies of the ICCP
Group, including Investment & Capital Corporation of the Philippines, Cebu Light Industrial Park,
Inc., Pueblo de Oro Development Corp., Regatta Properties, Inc, and RFM-Science Park of the
Philippines, Inc.; Chairman and President of Beacon Property Ventures, Inc. and Manila
Exposition Complex, Inc; Chairman of ICCP Venture Partners, Inc., and Director of Phinma
Corporation, Phinma Property Holdings Corp., Roxas & Co., Inc., Ionics, Inc., Ionics EMS, Inc.,
and Science Park of the Philippines, Inc.
Fernando Zobel de Ayala. Mr. Zobel, 50, Filipino, has served as Director since 1995. He is
currently the Vice Chairman, President and Chief Operating Officer of Ayala Corporation. His
other significant positions include: Chairman of Ayala Land, Inc., Manila Water Company, Inc.,
Ayala DBS Holdings, Inc. and Alabang Commercial Corporation; Vice Chairman of Azalea
Technology Investments, Inc., Co-Vice Chairman of Ayala Foundation, Inc. and Mermac, Inc.;
Director of Bank of the Philippine Islands, Integrated Micro-Electronics, Inc., Asiacom Philippines,
Inc., Ayala Hotels, Inc., AC International Finance Limited, Ayala International Pte, Ltd.; Member of
the Asia Society, World Economic Forum, INSEAD East Asia Council, and the World Presidents’
SEC Form 17A 2010
102
Organization; Director of the Board of Habitat for Humanity International and Chairman of the
Habitat for Humanity’s Asia-Pacific Steering Committee. He is also trustee of the International
Council of Shopping Centers; Member of the Board of Directors of Caritas Manila, Kapit Bisig
para sa Ilog Pasig Advisory Board, Pilipinas Shell Corporation and Pilipinas Shell Foundation.
SEC Form 17A 2010
103
B. Key Officers as of 31 December 2010
The key officers and consultants of the Company are appointed by the Board of Directors and
their appointment as officers may be terminated at will by the Board of Directors.
Key Officers – Globe
Name
Ernest L. Cu 1
Position
President and Chief Executive Officer
Catherine Hufana-Ang
Head – Internal Audit
Ferdinand M. dela Cruz
Head – Consumer Sales and After Sales
Rebecca V. Eclipse
Head – Office of Strategy Management
Rodell A. Garcia
2
Gil B. Genio
Vicente Froilan M. Castelo 4
Marisalve Ciocson-Co
3
Alberto M. de Larrazabal 5
Renato M. Jiao
6
Head – Technical Transformation
Head – Business Customer Facing Unit and President – Innove
Communications, Inc.
OIC – Corporate and Legal Services Group (formerly Corporate &
Regulatory Affairs Group)
Compliance Officer and Assistant Corporate Secretary
Chief Financial Officer and Treasurer
Head – Human Resources
Carmencita T. Orlina
Head – Consumer Marketing
Greg L. Romero
Head – Information Systems Group
Solomon M. Hermosura 3
Corporate Secretary
Consultants
Name
Lee Han Kheng
Rodolfo A. Salalima
Peter Bithos 7
Robert Tan 8
Position
Chief Operating Adviser
Chief Legal Counsel and Senior Advisor
Advisor for the Consumer Customer Facing Unit
Chief Technical Adviser
1
Member, Board of Directors
Assumed the position effective 9 December 2010. Mr. Garcia was previously Chief Technical Officer.
3
Assumed the position effective 6 July 2010.
4
Assumed the position effective 1 July 2010. Corporate and Legal Services Group was the former Corporate &
Regulatory Affairs Group.
5
Assumed the position effective 13 April 2010.
6
Assumed the position effective 1 June 2010.
7
Assumed the position effective 10 May 2010.
8
Assumed the position effective 9 December 2010.
2
Catherine Hufana-Ang. Ms. Ang, 40, Filipino, is currently the Head of Internal Audit. Ms. Ang is
a seasoned telecom audit professional with 20 years experience in financial, process and
systems auditing. She is a Certified Public Accountant and currently serves as a Board of
Director of The Institute of Internal Auditors-Philippines. Prior to joining Globe in 1996, she
worked with SGV & Co. and served as Manager for Operational and Systems Risk Management
at PricewaterhouseCoopers-Singapore. Ms. Ang graduated Magna Cum Laude with a degree in
Bachelor of Science in Commerce major in Accounting in 1991, and was a Graduate and
Associate of the Institute of Corporate Directors in 2007.
Ferdinand M. de la Cruz. Mr. de la Cruz, 44, Filipino, is currently the Head of Consumer Sales
and After Sales. He is a licensed Mechanical Engineer. He brings with him solid work experience
in the sales and marketing departments of multinational companies such as Kraft Foods and
Unilever Philippines. Before joining Globe, he was the President and General Manager of Kraft
Foods Philippines. He also served as Senior Vice-President for the Marketing & Sales Division of
Ayala Land, as well as National Sales Manager for San Miguel Brewing. Mr. de la Cruz joined the
Company in October 2002.
SEC Form 17A 2010
104
Rebecca V. Eclipse. Ms. Eclipse, 48, Filipino, is the Head of Office of Strategy Management.
She has more than 15 years experience in technology and telecom risk management, financial
management and auditing, drawn from SGV & Co, as well as Eastern Telecoms and Oceanic
Wireless Network. Ms. Eclipse joined Globe in March 1995.
Rodell A. Garcia. Mr. Garcia, 54, Filipino, is the Head of Technical Transformation. Prior to this
appointment, Mr. Garcia served as Chief Technical Officer of the Company. Before joining Globe
in 2000, he was Executive Vice President for the Information Technology Group of DBS Bank
Philippines, Inc. He also held several management positions in Citytrust Banking Corporation.
Gil B. Genio. Mr. Genio, 51, Filipino, is Head of Globe Business as well as Carrier Services, and
is concurrently the President of Innove Communications, Inc. Mr. Genio was Globe’s Senior Vice
President and Chief Financial Officer from 1997 until 2000. He is also currently a Managing
Director of Ayala Corporation. Prior to joining Globe, he served as Vice-President for Citibank,
N.A., managing Global Market Risk Review, and prior to that, Audit Head for Japan, Hong Kong
and the People’s Republic of China.
Solomon M. Hermosura. Mr. Hermosura, 48, Filipino, is the Corporate Secretary of Globe. He
assumed his role in July 2010. Mr. Hermosura is a Managing Director of Ayala Corporation and a
member of the Ayala Group Management Committee. He is also the General Counsel,
Compliance Officer, and Assistant Corporate Secretary of Ayala Corporation. He serves as
Director of Honda Cars Makati, Inc., Isuzu Automotive Dealership, Inc. and Ayala Aviation
Corporation; Corporate Secretary of Manila Water Co., Inc. and Ayala Foundation, Inc.; and
Assistant Corporate Secretary of Ayala Land, Inc. Mr. Hermosura earned his Bachelor of Laws
degree from San Beda College in 1986 and placed third in the 1986 Bar Examinations.
Vicente Froilan M. Castelo. Mr. Castelo, 46, Filipino, is the OIC for the Corporate and Legal
Services Group of Globe. He is a veteran in the practice of law, and is one of the pioneers in the
Telecommunications and Information Communication Technology field. He is a graduate of AB
Economics from Letran College, and earned his Bachelor of Laws from San Beda College. He
joined Globe Telecom as the Head of Regulatory Affairs in July 1998.
Marisalve Ciocson-Co. Ms. Co, 40, Filipino, is the Compliance Officer and Assistant Corporate
Secretary of Globe. She is also Head of Legal Services Division of the Corporate and Legal
Services Group. Ms. Co graduated Cum Laude with a degree in Bachelor of Arts in Political
Science from the University of the Philippines and her Juris Doctor (Law) degree from Ateneo de
Manila University College of Law.
Alberto M. de Larrazabal. Mr. de Larrazabal, 55, Filipino, is the Chief Financial Officer and
Treasurer. He joined Globe in June 2006 as Head of the Treasury Division. Mr. De Larrazabal
has had over two decades of extensive experience as a senior executive in Finance, Business
Development, Treasury Operations, Joint Ventures, Mergers and Acquisitions, as well as
Investment Banking and Investor Relations. Prior to joining Globe, he held such positions as VP
and CFO of Marsman Drysdale Corp., VP and Head of the Consumer Sector – JP Morgan, Hong
Kong, and SVP and CFO of San Miguel Corporation.
Renato M. Jiao. Mr. Jiao, 54, Filipino, is the Head of Human Resources. He joined Globe in
June 2010. Mr. Jiao has 29 years of experience in general management and leveraging leadingedge technologies, processes and human capital for competitive advantage. He is a seasoned
HR Practitioner with 10 years of experience in multi-functional HR practice areas. Mr. Jiao also
held various significant positions in Procter and Gamble (Philippines), Inc. and Procter and
Gamble Asia Pte Ltd. Prior to joining Globe, he was President of IBM Business Services, Inc.
Mr. Jiao earned his Bachelor of Science degree in Mechanical Engineering from the University of
the Philippines.
Carmencita T. Orlina. Ms. Orlina, 49, Filipino, is the Head of Consumer Marketing. She joined
Globe in September 2008. She comes with solid business grounding with strengths in consumer
marketing, sales and operations. Prior to joining Globe, Ms. Orlina served as Sales and Marketing
Director of Pfizer, Inc., Vice President for Asia-Pacific operations of Western Union and Chief
Marketing Officer of ABS-CBN Global.
SEC Form 17A 2010
105
Greg L. Romero. Mr. Romero, 43, Filipino, is the Head of the Information Systems Group. He
joined Globe in November 2001. Prior to joining Globe Telecom, Mr. Romero served as the
Information Technology Head of DBS Bank Philippines, Inc. and before that as IT Head of
Bankard, Inc. His work experience also includes managerial stints in the IT departments of
CityTrust Banking Corporation and Citibank, N.A.
Lee Han Kheng. Mr. Lee, 42, Singaporean, joined Globe as Chief Operating Adviser in 2007.
He is concurrently Managing Director of Singapore Telecom International (Philippines) Pte. Ltd.
Prior to joining Globe, Mr. Lee was SingTel’s Vice President for Business Products.
Rodolfo A. Salalima. Mr. Salalima, 63, Filipino, is the Chief Legal Counsel and Senior Advisor.
He joined Globe in 1993. Before his current appointment, Mr. Salalima was the Head of Globe’s
Corporate and Regulatory Affairs Group and served as its Assistant Corporate Secretary. He had
previously worked as a Managing Director of the Ayala Corporation. From 1992 to 1996, he
served as the first President and Founding Director of the Telecommunications and Broadcast
Attorneys of the Philippines, Inc. (TELEBAP). Mr. Salalima is currently the President of the
Philippine Chamber of Telecommunications Operators, Inc. (PCTO) and a Director in the
Telecoms Infrastructure Corporation of the Philippines (TELICPHIL).
Peter Bithos. Mr. Bithos, 39, American, is the Advisor for the Consumer Customer Facing Unit.
He joined Globe in May 2010. Mr. Bithos has had five years of senior management experience
with Optus where he held both strategy and operational positions and nine years of top-tier
strategy experience with Bain & Company as a Senior Engagement Leader in strategy
development and turnaround projects for Fortune 500 companies. Prior to joining Globe, he held
such positions as Director of Strategy and Corporate Development in SingTel Optus, and held
several key functions in Virgin Mobile Australia including Director, Strategy and New Markets,
Chief Operating Officer before becoming its Chief Executive Officer in 2008.
Robert Tan. Mr. Tan, 58, Singaporean, is the Chief Technical Adviser. He has over 3 decades
of professional and executive-level experience in the telecommunications industry within the Asia
Pacific Region. Prior to his appointment to Globe in December 2010, Mr. Tan was Head of the
Transmission and Facilities Engineering group of SingTel Optus for seven years. He also
managed the Mobile Deployment and Support Services group which played a critical role in
supporting the explosive growth of the wireless broadband business. He joined SingTel in 1975
where he built his expertise in Transmission and Access Engineering, including extensive
experience in technical due diligence work that involves the operational and engineering
assessment of companies for acquisition and strategic program of JV partners.
C.
Family Relationships
The Chairman of our Board of Directors, Jaime Augusto Zobel de Ayala, and a Director,
Fernando Zobel de Ayala, are brothers.
There are no known family relationships between the current members of the Board of Directors
and key officers other than the above.
D.
Significant Employee
The Company considers all its employees to be significant partners and contributors to the
business.
E.
Involvement in Certain Legal Proceedings
None of the directors, officers or members of the Company’s senior management had during the
last five years been subject to any of the following:
(a)
any bankruptcy, petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy or within two (2)
years prior to the time;
SEC Form 17A 2010
106
(b)
any conviction by final judgment of any offense in any pending criminal proceeding,
domestic or foreign, excluding traffic violations and other minor offenses;
(c)
any order, judgment or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any type of business,
securities, commodities, or banking activities; and
(d)
found by a domestic or foreign court of competent jurisdiction (in a civil action), the
Commission or comparable foreign body, or a domestic or foreign exchange or electronic
marketplace or self regulatory organization, to have violated a securities or commodities
law, and the judgment has not been reversed, suspended or vacated.
SEC Form 17A 2010
107
Item 9. Executive Compensation
A. Standard Arrangements
Directors
Article II Section 6 of the Company’s By-Laws provides:
“SECTION 6.COMPENSATION OF DIRECTORS - Directors as such shall not receive any stated
salary for their services, but, by resolution of the stockholders, a specific sum fixed by the
stockholders may be allowed for attendance at each regular or special meeting of the Board;
provided that nothing herein contained shall preclude any director from serving in any other
capacity and receiving compensation thereof.”
The stockholders have ratified a resolution in 2003 fixing the per-diem remuneration of P100,000
for non-executive Directors per Board meeting actually attended as a director or as a member of
a Board Committee. Additionally, executive directors do not receive per-diem remuneration.
The Company has no other arrangement with regard to the remuneration of its existing directors
and officers aside from the compensation received as herein stated.
Key Officers
The total annual compensation (salary and other variable pay) of the CEO and other senior
officers of the Company (excluding its subsidiaries) amounted to P164 million in 2010 and P213
million in 2009. The projected total annual compensation for 2011 is P153 million.
The total annual compensation paid to all senior personnel from Manager and up of the Company
(excluding its subsidiaries) amounted to P2,087 million in 2010 and P1,856 million in 2009. The
projected total annual compensation for 2011 is P2,149 million.
The total annual compensation for key officers and managers of the Company includes basic
salaries, guaranteed bonuses, fixed allowances and variable pay (performance-based annual
incentive) are shown below.
Name and Principal Position
Year
Salary
(in Php Mn)
Other Variable
Pay (in Php Mn)
Ernest L. Cu
President & Chief Executive Officer
Ferdinand M. dela Cruz
Head – Consumer Sales and After
Sales Group
Carmencita T. Orlina
Head – Consumer Marketing Group
Rebecca V. Eclipse
Head – Office of Strategy
Management
Greg L. Romero
Head – Information Systems Group
Rodell A. Garcia 1
Head – Technical Transformation
Gil B. Genio
Head – Business Customer Facing
Unit and President – Innove
Communications, Inc.
Caridad D. Gonzales 2
Corporate Secretary and Head –
Corporate and Regulatory Affairs
Group
Delfin C. Gonzalez, Jr.3
Chief Financial Officer
Alberto M. de Larrazabal 4
Chief Financial Officer
SEC Form 17A 2010
108
Vicente Froilan M. Castelo 5
Officer-in-Charge - Corporate &
Legal Services Group
Cathy Hufana Ang
Head – Internal Audit
Susan Rivera-Manalo 6
Head – Human Resources
Renato M. Jiao 7
Head – Human Resources
Marisalve C. Co 8 – Compliance
Officer and Assistant Corporate
Secretary
CEO & Most Highly Compensated
Executive Officers
All other officers 9 as a group
unnamed
Actual 2009
Actual 2010
Projected 2011
Actual 2009
Actual 2010
Projected 2011
117
110
108
1,398
1,481
1,544
96
54
45
458
606
605
1
Assumed the position effective 9 December 2010. Prior to this, Mr. Garcia was Chief Technical Officer.
Ms. Caridad D. Gonzales retired as of June 2010.
Mr. Delfin C. Gonzalez, Jr. moved back to Ayala Corporation as of April 2010
4
Assumed the position effective 13 April 2010. Prior to this, Mr. de Larrazabal was Head of Treasury.
5
Assumed the position effective 1 July 2010. Prior to this, Mr. Castelo was Head of Regulatory Affairs.
6
Ms. Susan Rivera-Manalo resigned as of April 2010
7
Assumed the position effective 1 June 2010.
8
Assumed the position effective 6 July 2010.
9
Managers and up.
2
3
The Company has no other arrangement with regard to the remuneration of its existing directors
and officers aside from the compensation received as herein stated.
The above named executive officers are covered by Letters of Appointment with the Company
stating therein their respective job functionalities, among others.
B. Other Arrangements
The Globe Group also has stock-based compensation, pension and benefit plans.
Stock Option Plans
The Globe Group has a share-based compensation plan called the Executive Stock Option Plan
(ESOP). The number of shares allocated under the ESOP shall not exceed the aggregate
equivalent of 6% of the authorized capital stock.
On October 1, 2009, the Globe Group granted additional stock options to key executives and
senior management personnel under the ESOP. The grant requires the grantees to pay a
nonrefundable option purchase price of P
= 1,000.00 until October 30, 2009, which is the closing
date for the acceptance of the offer. In order to avail of the privilege, the grantees must remain
with Globe Telecom or its affiliates from grant date up to the beginning of the exercise period of
the corresponding shares.
SEC Form 17A 2010
109
The following are the stock option grants to key executives and senior management personnel of
the Globe Group under the ESOP from 2003 to 2010:
Date of Grant
Number of
Options Exercise Price
Granted
April 4, 2003
680,200
July 1, 2004
803,800
March 24, 2006 749,500
May 17, 2007
604,000
August 1, 2008 635,750
October 1,
2009
298,950
Fair Value
of each
Option
Exercise Dates
50% of options exercisable
from April 4, 2005 to April 14,
P
= 547.00 per
2013; the remaining 50%
share
exercisable from April 4, 2006
to April 14, 2013
50% of options exercisable
P
= 840.75 per from July 1, 2006 to June 30,
share 2014; the remaining 50% from
July 1, 2007 to June 30, 2014
50% of the options become
exercisable from March 24,
P
= 854.75 per 2008 to March 23, 2016; the
share
remaining 50% become
exercisable from March 24,
2009 to March 23, 2016
50% of the options become
exercisable from May 17, 2009
P
= 1,270.50 per
to May 16, 2017, the remaining
share
50% become exercisable from
May 17, 2010 to May 16, 2017
50% of the options become
exercisable from August 1,
P
= 1,064.00 per 2010 to July 31, 2018, the
share
remaining 50% become
exercisable from August 1,
2011 to July 31, 2018
50% of the options become
exercisable from October 1,
2011 to September 30, 2019,
P
= 993.75 per
the remaining 50% become
share
exercisable from October 1,
2012 to
September 30, 2019
Fair Value
Measurement
P
= 283.11
Black-Scholes
option pricing
model
P
= 357.94
Black-Scholes
option pricing
model
P
= 292.12
Trinomial option
pricing model
P
= 375.89
Trinomial option
pricing model
P
= 305.03
Trinomial option
pricing model
P
= 346.79
Trinomial option
pricing model
The exercise price is based on the average quoted market price for the last 20 trading days
preceding the approval date of the stock option grant.
Of the below named directors and officers, there were 4,000 common shares exercised in 2010.
Name
Ernest L.
Cu
Ferdinand
M. de la
Cruz
Carmencit
a T. Orlina
Rebecca
V. Eclipse
Greg L.
Romero
SEC Form 17A 2010
Position
No. of
Shares
Date of
Grant
Ave Price
at date of
grant
(Offer
Price)
Ave
Price
(Exercis
e Price)
Balance of
outstanding &
exercisable
options at end
of period
President and
Chief Executive
Officer
Head –
Consumer
Sales and After
Sales
Head –
Consumer
Marketing
Head – Office of
Strategy
Management
Head –
Information
Systems Group
110
Rodell A.
Garcia
Gil B.
Genio
Alberto M.
de
Larrazabal
Vicente
Froilan M.
Castelo
Catherine
HufanaAng
Renato M.
Jiao
Head –
Technical
Transformation
Head –
Business CFU &
President –
Innove
Communication
s, Inc.
Chief Financial
Officer
OIC - Corporate
& Legal
Services Group
Head – Internal
Audit
Head – Human
Resources
Marisalve
C. Co
Compliance
Officer & Asst.
Corporate
Secretary
All above-named Officers as
a Group
4,000
2006
854.75
878
219,250
The Company has not adjusted nor amended the exercise price of the options previously awarded to the above
named officers.
A summary of the Globe Group’s ESOP activity and related information follows:
2010
2009
Weighted
Weighted
Average
Average
Number of
Exercise
Number of
Exercise
Shares
Price
Shares
Price
(In Thousands and Per Share Figures)
2008
Weighted
Average
Number of
Exercise
Shares
Price
Outstanding, at beginning of
year
Granted
Exercised
Expired/forfeited
2,038,106
–
(34,900)
(155,125)
P
= 1,041.62
–
817.79
1,018.39
1,929,732
298,950
(137,626)
(52,950)
P
= 1,035.76
993.75
843.22
1,073.58
1,617,114
650,450
(247,332)
(90,500)
P
= 994.57
1,052.32
846.80
935.02
Outstanding, at end of year
1,848,081
P
= 1,047.80
2,038,106
P
= 1,041.62
1,929,732
P
= 1,035.76
Exercisable, at end of year
1,267,506
P
= 1,055.41
828,281
P
= 962.78
363,032
P
= 792.12
The average share prices at dates of exercise of stock options as of December 31, 2010, 2009
and 2008 amounted to P
= 948.65, P
= 975.26 and P
= 1,461.82, respectively.
As of December 31, 2010, 2009 and 2008, the weighted average remaining contractual life of
options outstanding is 6.65 years, 7.59 years, and 8.13 years, respectively.
SEC Form 17A 2010
111
The following assumptions were used to determine the fair value of the stock options at effective
grant dates:
October 1, 2009 August 1, 2008 May 17, 2007 March 24, 2006 July 1, 2004 April 4, 2003
Share price
P
= 995.00
P
= 1,130.00
P
= 1,340.00
P
= 930.00
P
= 835.00
P
= 580.00
Exercise price
P
= 993.75
P
= 1,064.00
P
= 1,270.50
P
= 854.75
P
= 840.75
P
= 547.00
48.49%
31.73%
38.14%
29.51%
39.50%
34.64%
10 years
10 years
10 years
10 years
10 years
10 years
Expected dividends
6.43%
6.64%
4.93%
5.38%
4.31%
2.70%
Risk-free interest rate
8.08%
9.62%
7.04%
10.30%
12.91%
11.46%
Expected volatility
Option life
The expected volatility measured at the standard deviation of expected share price returns was
based on analysis of share prices for the past 365 days.
Cost of share-based payments for the years ended December 31, 2010, 2009 and 2008
amounted to P
= 104.79 million, P
= 126.44 million and P
= 182.32 million, respectively.
Pension Plan
The Globe Group has a funded, noncontributory, defined benefit pension plan covering
substantially all of its regular employees. The benefits are based on years of service and
compensation on the last year of employment.
The components of pension expense (included in staff costs under “General, selling and
administrative expenses”) in the consolidated statements of comprehensive income are as
follows:
2010
Current service cost
Interest cost on benefit obligation
Expected return on plan assets
Net actuarial losses
Total pension expense
Actual return (loss) on plan assets
P
= 245,766
181,638
(232,747)
47,110
P
= 241,767
P
= 234,071
2009
(In Thousand Pesos)
P
= 163,382
156,182
(234,018)
(41)
P
= 85,505
P
= 181,051
2008
P
= 221,289
136,160
(138,301)
28,314
P
= 247,462
(P
= 184,599)
The funded status for the pension plan of Globe Group is as follows:
P
= 2,186,228
(2,355,730)
(169,502)
(781,014)
2009
(In Thousand Pesos)
P
= 2,079,316
(2,334,772)
(255,456)
(799,539)
P
= 1,319,742
(2,344,764)
(1,025,022)
(115,403)
(P
= 950,516)
(P
= 1,054,995)
(P
= 1,140,425)
2010
Benefit obligation
Plan assets
Unrecognized net actuarial losses
Asset recognized in the
consolidated statements of
financial position*
2008
*Of this amount, P
= 951.08 million is included in “Other noncurrent assets” account, while the P
= 0.57 million is
included in “Accrued expenses” under “Accounts payable and accrued expenses” account as of December 31,
2010.
SEC Form 17A 2010
112
The following tables present the changes in the present value of defined benefit obligation and
fair value of plan assets:
Present value of defined benefit obligation
2009
(In Thousand Pesos)
P
= 2,079,316
P
= 1,319,742
181,638
156,182
245,766
163,382
(167,620)
(129,761)
(152,872)
569,771
P
= 2,186,228
P
= 2,079,316
2008
2010
Balance at beginning of year
Interest cost
Current service cost
Benefits paid
Actuarial losses (gains)
Balance at end of year
P
= 1,690,615
136,160
221,289
(87,941)
(640,381)
P
= 1,319,742
Fair value of plan assets
2009
(In Thousand Pesos)
P
= 2,334,772
P
= 2,344,764
232,747
234,018
137,287
104
(167,620)
(129,761)
(181,456)
(114,353)
P
= 2,355,730
P
= 2,334,772
2008
2010
Balance at beginning of year
Expected return
Contributions
Benefits paid
Actuarial losses
Balance at end of year
P
= 1,341,568
138,301
1,225,345
(87,941)
(272,509)
P
= 2,344,764
The recommended contribution for the Globe Group retirement fund for the year 2011 amounted
to P
= 119.52 million. This amount is based on the Globe Group’s actuarial valuation report as of
December 31, 2010.
As of December 31, 2010, 2009 and 2008, the allocation of the fair value of the plan assets of the
Globe Group follows:
2010
Investments in fixed income
securities:
Corporate
Government
Investments in equity securities
Others
12.66%
20.96%
63.89%
2.49%
2009
12.40%
18.71%
66.81%
2.08%
2008
21.02%
12.80%
64.12%
2.06%
In 2008, Globe, Innove and GXI pooled its plan assets for single administration by the fund
managers. The EGG Group’s retirement fund is being managed separately and the amount of
defined benefit obligation is immaterial.
As of December 31, 2010, the pension plan assets of the Globe Group include shares of stock of
Globe Telecom with total fair value of P
= 14.79 million, and shares of stock of other related parties
with total fair value of P
= 52.90 million.
The assumptions used to determine pension benefits of Globe Group are as follows:
Discount rate
Expected rate of return on plan
assets
Salary rate increase
2010
8.50%
2009
9.00%
2008
12.33%
10.00%
6.00%
10.00%
7.00%
10.00%
7.00%
In 2010, 2009 and 2008, the Globe Group applied a single weighted average discount rate that
reflects the estimated timing and amount of benefit payments and the currency in which the
benefits are to be paid.
The overall expected rate of return on plan assets is determined based on the market prices
prevailing on that date, applicable to the period over which the obligation is to be settled.
SEC Form 17A 2010
113
Amounts for the current and previous four years are as follows:
2010
Defined benefit obligation
Plan assets
Deficit (surplus)
P
= 2,186,228
2,355,730
(169,502)
2009
2008
(In Thousand Pesos)
P
= 2,079,316
P
= 1,319,742
2,334,772
2,344,764
(255,456)
(1,025,022)
2010
Experience adjustments:
Gain (loss) on plan liabilities
Gain (loss) on plan assets
(P
= 23,901)
(181,456)
2009
(In Thousand Pesos)
P
= 18,390
(114,327)
2007
2006
P
= 1,690,615
1,341,568
349,047
P
= 1,267,209
1,254,906
12,303
2008
(P
= 51,340)
(272,539)
2007
(P
= 170,819)
29,780
There are no agreements between the Globe Group and any of its directors and key officers
providing for benefits upon termination of employment, except for such benefits to which they may
be entitled under the Globe Group’s retirement plans.
SEC Form 17A 2010
114
Item 10. Security Ownership of Certain Record, Beneficial Owners & Management
Security Ownership of Certain Record and Beneficial Owners (of more than 5%) as of
31 December 2010
A.
Title of
Class
Preferred
Common
Common
Common
1
2
3
4
5
Name, address of
Record Owner and
Relationship with
Issuer
Asiacom Philippines,
1
Inc.
34/F Tower 1
Bldg.,Ayala Ave.,Makati
City
Singapore Telecom Int’l.
Pte. Ltd. (STI) 2
31 Exeter Road,
Comcentre, Singapore
3
Ayala Corporation
34/F Tower 1 Bldg.Ayala
Ave., Makati City
PCD Nominee Corp.
(Non-Filipino) 4
G/F Makati Stock Exch.
Bldg.,Ayala Avenue,
Makati City
No. of
Shares Held
% of
total o/s
shares
158,515,021
54.50%
Singaporean
62,646,486
21.54%
Ayala Corporation (AC)
Filipino
40,319,263
13.86%
Hongkong and
Shanghai Banking
Corporation (HSBC) 5
Various
20,515,786
7.05%
Name of Beneficial
Owner & Relationship
with Record Owner
Citizenship
Asiacom Philippines,
Inc. (Asiacom)
Filipino
Singapore Telecom Int’l.
Pte. Ltd.
Asiacom Philippines, Inc. (“Asiacom”) is a significant shareholder of the Company. As per the Asiacom By-laws and
the Corporation Code, the Board of Directors of Asiacom has the power to decide how the Asiacom shares in
Globe are to be voted
STI, a wholly-owned subsidiary of SingTel (Singapore Telecom), is a significant shareholder of the Company. As
per its By-laws, STI, through its appointed corporate representatives, has the power to decide how the STI
shares in Globe are to be voted.
Ayala Corporation (“AC”) is a significant shareholder of the Company. As per the AC By-laws & the Corporation
Code, the Board of Directors of AC has the power to decide how AC shares in Globe are to be voted.
The PCD is not related to the Company.
HSBC is a participant of PCD. The 12,809,841 shares beneficially owned by HSBC form part of the 20,515,786
shares registered in the name of the PCD (Non-Filipino). The clients of HSBC have the power to decide how their
shares are to be voted.
SEC Form 17A 2010
115
B. Security Ownership of Directors and Management (Corporate Officers) as of
31 December 2010
Title of
Class
Name of Beneficial Owner
Amount and Nature of
Beneficial Ownership
Citizenship
Percent
of
Class
Directors
Common
Jaime Augusto Zobel de Ayala
3 (direct and indirect)
Filipino
0.00%
Common
Delfin L. Lazaro
1 (direct)
Filipino
0.00%
Common
Hui Weng Cheong
2 (direct)
Singaporean
0.00%
Common
Fernando Zobel de Ayala
1 (direct)
Filipino
0.00%
Common
Gerardo C. Ablaza, Jr.
49,975 (direct and indirect)
Filipino
Preferred
Common
Romeo L. Bernardo
1 (indirect)
834 (direct)
Filipino
0.02%
0.00%
0.00%
Common
Koh Kah Sek
2 (direct)
Malaysian
0.00%
Common
Roberto F. de Ocampo
1 (direct)
Filipino
0.00%
Common
Xavier P. Loinaz
10 (direct)
Filipino
0.00%
Preferred
Common
Preferred
Guillermo D. Luchangco
1 (indirect)
11,000 (direct)
Ernest L. Cu
Filipino
0.00%
0.01%
1 (direct)
Filipino
0.00%
Corporate Officers
Preferred
Ernest L. Cu
Common
Ferdinand M. de la Cruz
Common
Rebecca V. Eclipse
Common
Rodell A. Garcia
Common
Gil B. Genio
Common
Common
1 (direct)
Filipino
0.00%
3,594 (direct)
Filipino
0.00%
9,254 (indirect)
Filipino
0.01%
7,790 (direct)
Filipino
0.00%
46,203 (indirect)
Filipino
0.03%
Alberto M. de Larrazabal
500 (direct)
Filipino
0.00%
Marisalve Ciocson-Co
832 (direct)
Filipino
0.00%
Common
Catherine Hufana-Ang
948 (direct)
Filipino
0.00%
Common
Greg L. Romero
647 (direct)
Filipino
0.00%
Common
Renato V. Jiao
-
Filipino
0.00%
Common
Carmencita T. Orlina
-
Filipino
0.00%
20 (direct)
Filipino
0.00%
Other Executive Officers
Common
Solomon M. Hermosura
All directors and Officers as a group
131,620
0.05%
None of the members of the Company’s directors and management own 2% or more of the
outstanding capital stock of the Company.
Item 11. Certain Relationships and Related Transactions
For more information on refer to Note 16 of the attached 2010 Notes to the Consolidated
Financial Statements.
SEC Form 17A 2010
116
PART IV – CORPORATE GOVERNANCE
We strive to adhere to the highest standards of ethics and governance in all that we do. Globe
recognizes the importance of good governance in realizing its vision, carrying out its mission, and
living out its values to create and sustain increased value for all its stakeholders. The impact of
global conditions and challenges further underscores the need to uphold the Company’s high
standards of corporate governance to strengthen its structures and processes.
Corporate Governance Policies
As strong advocates of accountability, transparency and integrity in all aspects of the business,
the Board of Directors (“Board”), management, officers, and employees of Globe commit
themselves to the principles and best practices of governance in the attainment of its corporate
goals.
The basic mechanisms for corporate governance are principally contained in the Company’s
Articles of Incorporation and By-Laws. These documents lay down, among others, the basic
structure of governance, minimum qualifications of directors, and the principal duties of the Board
and officers of the Company.
The Company’s Manual of Corporate Governance supplements and complements the Articles
of Incorporation and By-Laws by setting forth the principles of good and transparent governance.
In 2009, the Company commissioned a review of the manual to update and improve it. This
review was completed in February 2010 and new provisions have been incorporated in the
manual to conform with SEC Circular Memorandum Order 6 Series of 2009 Revised Code of
Corporate Governance. The Board Committee Charters were also revisited to align with the
company’s Manual of Corporate Governance.
The Company has likewise adopted a Code of Conduct, Conflict of Interest, and a
Whistleblower Policy, and has existing formal policies concerning Unethical, Corrupt and
Other Prohibited Practices covering both its employees and the members of the Board. These
policies serve as guide to matters involving work performance, dealings with employees,
customers and suppliers, handling of assets, records and information, avoidance of conflict of
interest situations and corrupt practices, as well as the reporting and handling of complaints from
whistleblowers, including reports of fraudulent reporting practices.
Moreover, the Company adopted an expanded corporate governance approach in managing
business risks. A Revised Enterprise Risk Management Policy was developed to provide a
better understanding of the different risks that could threaten the achievement of the Company’s
vision, mission, strategies and goals. The policy also highlights the vital role that each individual
plays in the organization – from the Senior Executive Group (SEG) to the staff – in managing
risks and in ensuring that the Company’s business objectives are attained.
New initiatives are regularly pursued to develop and adopt corporate governance best practices,
and to build the right corporate culture across the organization. In 2010, Globe participated in
various activities of the Institute of Corporate Directors (ICD), Philippine Stock Exchange (PSE)
and the Philippine Securities and Exchange Commission (SEC) to improve corporate governance
practices and refine the corporate governance self-rating system and scorecard used by publicly
listed companies to assure good corporate governance.
The following sections summarize the key corporate governance structures, processes and
practices adopted by Globe.
SEC Form 17A 2010
117
Board of Directors
Key Roles
The Board of Directors is the supreme authority in matters of governance. The Board establishes
the vision, mission, and strategic direction of the Company, monitors over-all corporate
performance, and protects the long-term interests of the various stakeholders by ensuring
transparency, accountability, and fairness. The Board has oversight responsibility for risk
management function while ensuring the adequacy of internal control mechanisms, reliability of
financial reporting, and compliance with applicable laws and regulations.
In addition, certain matters are reserved specifically for the Board’s disposition, including the
approval of corporate operating and capital budgets, major acquisitions and disposals of assets,
major investments, and changes in authority and approval limits.
Board Composition
The Board is composed of eleven (11) members, elected by stockholders entitled to vote during
the Annual Stockholders Meeting (ASM). The Board members hold office for one year and until
their successors are elected and qualified in accordance with the By-laws of the Company.
The roles of the Chairman of the Board and the Chief Executive Officer (CEO) are clearly
delineated and are held by two individuals to ensure balance of power and authority and to
promote independent decision making. Of the eleven members of the Board, only the President &
CEO is an executive director; the rest are non-executive directors who are not involved in the
day-to-day management of the business.
In compliance with the Revised Code of Corporate Governance, the Board has two independent
directors of the caliber necessary to effectively weigh in on Board discussions and decisions.
Globe defines an independent director as a person who is independent from management and
free from any business or other relationship which could materially interfere with his exercise of
independent judgment in carrying out his responsibilities as a director.
All board members have the expertise, professional experience, and background that allow for a
thorough examination and deliberation of the various issues and matters affecting the Company.
The members of the Board have likewise attended trainings on corporate governance prior to
assuming office.
The qualifications of all board nominees are reviewed by the Nomination Committee, chaired by
an independent director. The profiles of the directors are found in the “Board of Directors” section
of this Annual Report.
As of December 31, 2010, the Board is comprised of the following members:
Directors
Jaime Augusto Zobel de Ayala*
Position
Chairman
Nature of Appointment
Non-executive
Gerardo C. Ablaza, Jr.
Hui Weng Cheong
Delfin L. Lazaro
Ernest L. Cu
Romeo L. Bernardo
Koh Kah Sek
Xavier P. Loinaz
Guillermo D. Luchangco
Roberto F. de Ocampo
Fernando Zobel de Ayala*
Co-Vice Chairman
Co-Vice Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Non-executive
Non-executive
Non-executive
Executive
Non-executive
Non-executive
Non-executive / Independent
Non-executive / Independent
Non-executive
Non-executive
* Mr. Jaime Augusto Zobel de Ayala and Mr. Fernando Zobel de Ayala are brothers.
SEC Form 17A 2010
118
Board Remuneration
In accordance with the Company’s By-Laws, the Board members receive stock options and
remuneration in the form of a specific sum for attendance at each regular or special meeting of
the Board. A per diem of P100,000 per Board or committee meeting was agreed and approved by
the shareholders during the ASM held last April 1, 2003. The remuneration is intended to provide
a reasonable compensation to the directors in recognition of their responsibilities and the potential
liability they assume as a consequence of the high standard of best practices required of the
Board as a body and of the directors individually, under the SEC-promulgated Code of Corporate
Governance. Also, the level of per diem is in line with standards currently practiced among
publicly listed companies similar to Globe.
Board Performance
Directors attend regular meetings of the Board, which are normally held on a monthly basis, as
well as special meetings of the Board, and the ASM. A director must have attended at least 50%
of all meetings held in a year in order to be qualified for re-election in the following year.
The Board met eleven (11) times in 2010, including the ASM. The attendance of the individual
directors at these meetings is duly recorded, as follows:
2010
Regular and
Special
Meetings
2009
Annual
Stockholders’
Meeting
Regular and
Special
Meetings
Annual
Stockholders’
Meeting
Present Absent Present Absent Present Absent Present Absent
Jaime Augusto Zobel de Ayala
Delfin L. Lazaro
Fernando Zobel de Ayala
Gerardo C. Ablaza, Jr.
Ernest L. Cu
Mark Chong Chin Kok*
Hui Weng Cheong**
Koh Kah Sek
Romeo L. Bernardo
Xavier P. Loinaz
Guillermo D. Luchangco
Roberto F. de Ocampo
Chang York Chye
7
9
9
8
10
4
2
9
10
10
9
9
-
3
1
1
2
0
3
1
1
0
0
1
1
1
1
1
1
1
1
1
1
1
1
1
0
0
0
0
0
0
0
0
0
0
0
8
10
7
9
10
3
9
10
8
9
9
2
0
3
1
0
0
1
0
2
1
1
-
-
-
7
0
1
1
1
1
1
1
1
1
1
1
1
0
0
0
0
0
0
0
0
0
0
0
* Mark Chong Chin Kok was appointed Director and Co-Vice Chairman in place of Chang York Chye at the 6 October
2009 Board Meeting
**Hui Weng Cheong was appointed Director and Co-Vice Chairman in place of Mark Chong Chin Kok at the 8 October
2010 Board Meeting.
The average attendance rate of members of the Board was at 88% for 2010 and 91% for 2009.
All directors have individually complied with the SEC’s minimum attendance requirement of 50%.
Prior to the Board meetings, all of the directors are provided with board papers which include
reports on the Company’s strategic, operational, and financial performance and other regulatory
matters. The Board also has access to the Corporate Secretary who, among other functions,
oversees the flow of information to the Board prior to the meetings and who serves as adviser to
the directors on their responsibilities and obligations. The members of the Board also have
access to management should they need to clarify matters concerning items submitted for their
consideration.
The Board conducts an annual self-assessment to ensure the continuing effectiveness of its
processes and to identify areas for improvement. During the last meeting of every year, the Board
meets in executive session to evaluate and discuss various matters concerning the Board,
including that of its own performance and that of the Company’s management team.
SEC Form 17A 2010
119
Board Committees
To further support the Board in the performance of its functions and to aid in good governance,
the Board has established five (5) committees. The role and function of each Board Committee is
described in detail below.
1. Executive Committee
The Executive Committee’s roles and responsibilities are clearly defined in the Executive
Committee Charter approved by the Board. The Executive Committee (ExCom) is comprised of
five (5) members appointed by the Board. The ExCom acts by majority vote and in accordance
with the authority granted by the Board. All actions of the ExCom are reported to the Board at the
meeting following such action and are subject to ratification or revision and alteration by the
Board.
2. Audit Committee
The Audit Committee’s roles and responsibilities are clearly defined in the Audit Committee
Charter approved by the Board. The Committee supports the corporate governance process of
the Company by fulfilling its oversight responsibility relating to a) the integrity of the financial
statements and the financial reporting process; b) internal controls and financial reporting
principles, policies, and systems; c) the qualifications, independence and remuneration of the
independent auditors; d) internal audit function and independent auditors’ performance; and e)
compliance with legal, regulatory, and corporate governance requirements. Management
however has the primary responsibility for the financial statements and the reporting process,
including the system of internal controls and risk management.
The Committee is composed of three members, one of whom is an independent director. An
independent director chairs the Audit Committee. All members of the Audit Committee are
appointed by the Board.
The Committee ensures tenders for independent audit services are conducted, reviews audit
fees, and recommends the appointment and fees of the independent auditors to the Board. The
Board, in turn, submits the appointment of the independent auditors and their fees for approval of
the shareholders at the ASM. The amount of audit fees is disclosed in this Annual Report.
The Audit Committee also approves the work plan of the Globe Internal Audit Group, as well as
the overall scope and work plan of the independent auditors.
The Audit Committee meets at least once every quarter and invites non-members, including the
President & CEO, Chief Financial Officer, independent and internal auditors, and other key
persons involved in company governance, to attend meetings where necessary. During these
meetings:
•
The Committee reviews the financial statements and all related disclosures and
reports certified by the Chief Financial Officer, and released to the public and/or
submitted to the Philippine SEC for compliance with both the internal financial
management handbook and pertinent accounting standards, including regulatory
requirements. The Committee, after its review of the quarterly unaudited and annual
audited consolidated financial statements of Globe Telecom, Inc. and Subsidiaries,
endorses these to the Board for approval.
•
The Committee meets with the internal and independent auditors, and discusses the
results of their audits, ensuring that management is taking appropriate corrective
actions in a timely manner, including addressing internal controls and compliance
issues.
•
The Committee reviews the performance and recommends the appointment,
retention or discharge of the independent auditors, including the fixing of their
remuneration, to the full Board. On an annual basis, the Committee also assesses
the independent auditor’s qualifications, skills, resources, effectiveness and
SEC Form 17A 2010
120
independence. The Committee also reviews and approves the proportion of audit and
non-audit work both in relation to their significance to the auditor and in relation to the
Company’s total expenditure on consultancy, to ensure that non-audit work will not be
in conflict with the audit functions of the independent auditor.
•
The Committee reviews the plans, activities, staffing, and organizational structure and
assesses the effectiveness of the internal audit function, including conformance with
the International Standards for the Professional Practice of Internal Auditing (ISPPIA).
•
The Committee provides oversight of the financial reporting and operational risks,
specifically on financial statements, internal controls, legal or regulatory compliance,
corporate governance, risk management and fraud risks. The Committee also
reviews the results of management’s annual risk assessment exercise.
The Audit Committee reports after each meeting and provides a copy of the minutes of its
meetings to the full Board. (Also see Annual Report of the Audit Committee to the Board of
Directors in page 127 of this 17A Report)
To ensure compliance with regulatory requirements and assess the appropriateness of the
existing Charter for enabling good corporate governance, the Committee also reviews and
assesses the adequacy of its Charter annually, seeking Board approval for any amendments.
The Committee conducts an annual assessment of its performance to benchmark its practices
against the expectations set out in the approved Charter, and to ensure that it continues to fulfill
its responsibilities in accordance with global best practices and in compliance with the Manual of
Corporate Governance and other relevant regulatory requirements. The results of the selfassessment and any ensuing action plans formulated to improve the Committee’s performance
are reported to the Board.
3. Compensation and Renumeration Committee
The Compensation and Remuneration Committee’s roles and responsibilities are clearly defined
in the Compensation and Remuneration Committee Charter approved by the Board. The
Committee is composed of three (3) members, one of whom is an independent director. All
members of the Compensation and Remuneration Committee are appointed by the Board.
The Committee is tasked to review the compensation philosophy and structure of the Company
and the reasonableness of its compensation and incentive plans and structures. The Committee
also reviews and approves the Company’s annual compensation plan and annual incentive plan.
In reviewing the plans, the Committee considers relevant industry and multi-industry benchmarks
in order to assess the reasonableness of management’s recommendations. The compensation
plan also includes retention structures for key positions. The Compensation and Remuneration
Committee usually meets at least twice a year, or more often as required.
The Stock Options Committee is a sub-committee of the Compensation and Remuneration
Committee and has two (2) members. The Stock Options Committee considers the framework for
the award of stock options to managers and executives, to the directors, and to certain key
consultants.
4. Nominations Committee
The Nomination Committee’s roles and responsibilities are clearly defined in the Nomination
Committee Charter approved by the Board. The Committee is composed of three (3) members,
including one independent director. An independent director chairs the Committee. All members
of the Nomination Committee are appointed by the Board.
The Nomination Committee reviews the qualifications of all persons nominated to position in the
Corporation which require appointment by the Board.
The Committee meets at least once in the first quarter of the year to review the qualifications and
attendance of the nominees to the Board prior to the list of nominees being submitted to the
SEC Form 17A 2010
121
stockholders at the ASM. Thereafter, it meets as often as required to review specific nominations
of key hires and promotions to key positions as they come up in the ordinary course of business.
5. Finance Committee
The Finance Committee’s roles and responsibilities are clearly defined in the Finance Committee
Charter approved by the Board. The Finance Committee is responsible for reviewing and
evaluating the financial affairs of the Company, including conducting an annual review of all
financial activities during the immediately preceding year prior to each ASM. The Committee is
composed of four (4) members. All members of the Finance Committee are appointed by the
Board.
On 8 February 2011, the Board of Directors approved the Finance Committee Charter. Under the
new charter, the Committee shall be composed of such number of members as the Board may
designate but in no case less than three (3) members, majority of whom shall be existing Board
members.
The members of each Board committee are set forth below:
Executive Committee
Jaime Augusto Zobel de Ayala*
Hui Weng Cheong
Ernest L. Cu
Gerardo C. Ablaza, Jr.
Compensation &
Remuneration Committee
Gerardo C. Ablaza, Jr.*
Guillermo D. Luchangco
Hui Weng Cheong
Finance Committee
Delfin L. Lazaro*
Koh Kah Sek
Delfin C. Gonzalez, Jr.
Alberto M. De Larrazabal
Koh Kah Sek
Audit Committee
Nomination Committee
Xavier P. Loinaz*
Romeo L. Bernardo
Guillermo D. Luchangco*
Gerardo C. Ablaza, Jr.
Koh Kah Sek
Hui Weng Cheong
* Chairman
At the October 8, 2010 Board meeting, Mr. Hui Weng Cheong was also appointed member of the
Executive Committee, Nomination Committee and Compensation & Remuneration Committee in place
of Mr. Mark Chong Chin Kok.
SEC Form 17A 2010
122
In 2010, the Executive Committee met fifteen (15) times, Audit Committee met four (4) times, the
Nomination Committee met six (6) times, the Compensation & Remuneration Committee met two
(2) times and Finance Committee met once. The Attendance of the members of these
Committees is duly recorded, as follows:
Executive Committee
Finance Committee
Present
Absent
13
8
2
3
Hui Weng Cheong2
10
8
15
3
5
7
0
1
Ferdinand M. de la Cruz3
3
0
Name
Gerardo C. Ablaza, Jr.
1
Mark Chong Chin Kok
Koh Kah Sek
Jaime Augusto Zobel de Ayala
Ernest L. Cu
Name
Koh Kah Sek
Delfin L. Lazaro
Delfin C. Gonzalez, Jr.
Alberto M. De Larrazabal
Compensation & Remuneration Committee
Name
Guillermo D. Luchangco
Gerardo C. Ablaza, Jr.
Mark Chong Chin Kok1
Present
Absent
1
1
0
0
1
1
0
0
Audit Committee
Present
Absent
2
2
2
0
0
0
Name
Xavier P. Loinaz
Romeo L. Bernardo
Koh Kah Sek
Present
Absent
4
4
4
0
0
0
Nomination Committee
Name
Guillermo D. Luchangco
Gerardo C. Ablaza, Jr.
Present
Absent
6
6
6
0
0
0
Mark Chong Chin Kok1
1
Mark Chong Chin Kok resigned from the Board on 1 October 2010.
2
Hui Weng Cheong was elected on 8 October 2010.
3
Ferdinand M. dela Cruz was a member of the Excom from Jan. to Mar. 2010
Management
The President & CEO, guided by the Company’s vision, mission, and values statements, is
accountable to the Board for the development and recommendation of strategies, and the
execution of the defined strategic imperatives. The President & CEO is assisted by the heads of
each of the major business units and support groups.
The Office of Strategy Management (OSM) reports to the President & CEO and oversees the
Company’s strategy management processes from strategy formulation, translation to executable
plans, horizontal alignment of business objectives across the organization, to execution and
performance tracking linked to the Company’s rewards system.
Every year, the Company reviews and formulates its strategic priorities which then guide the
formulation of the key business strategies and goals for the year. Using the balanced scorecard
framework, each business group identifies financial and non-financial objectives, and sets targets
and initiatives to achieve them as reflected in the groups’ Terms of Reference (TOR). To ensure
line of sight, the group TORs are cascaded to all employees, making sure that everyone
understands and appreciates their contribution to the group goals. This helps in developing
individual performance plans that are aligned with the key strategies. Rewards and incentives are
given based on the achievement of the committed group and individual targets.
Key programs, projects, and major organizational initiatives are taken up at the SEG, composed
of the President and CEO, as well as the heads of each of the major business units and support
groups. All budgets and major capital expenditures must be approved in accordance with the
Company’s limits of authority and by the CEO prior to endorsement to the Board for approval. The
Chief Operating Adviser and Chief Legal Adviser also provide inputs to the SEG as required. The
SEG meets at least once a week.
SEC Form 17A 2010
123
Management is mandated to provide complete and accurate information on the operations and
affairs of the Company in a timely manner. Management is also required to prepare financial
statements for each preceding financial year in accordance with Philippine Financial Reporting
Standards (PFRS). Management’s statement of responsibility with regard to the Company’s
financial statements is included in this annual report.
The annual compensation of the key officers of the Company, including the President & CEO, is
disclosed in the Definitive Information Statement distributed to the shareholders. The total annual
compensation includes the basic salary, guaranteed bonuses, fixed allowances, and variable pay
(performance-based annual incentive).
Recognition for Excellence in Corporate Governance
Globe’s continuous effort in strengthening the company’s good governance and practices led to
reap several citations and awards.
In May 2010, the Institute of Corporate Directors (ICD) conferred Globe Telecom the Gold award
as one of the top 15 highest scores at 95 percent and above among publicly listed companies in
the 2009 Corporate Governance Scorecard. This is a joint project of ICD with the Securities and
Exchange Commission, Philippine Stock Exchange, Institute of Internal Auditors of the
Philippines, Ateneo Law School, and Center for International Private Enterprise.
Globe also bagged seven awards out of the nine sectors in the 10th Annual Poll of Philippine Top
Companies by Finance Asia, a leading financial publishing company in Asia with bureaus in Hong
Kong, Singapore, and Sydney.
Among the distinction received are, second place in Best Managed Company and Best in
Corporate Governance categories, second place in terms of the Most Committed to a Strong
Dividend, third in Investor Relations, and eighth in Corporate Social Responsibility.
Also, Ernest L. Cu, Globe President and CEO, was adjudged Best CEO along with Globe
Chairman and Ayala CEO Jaime Augusto Zobel de Ayala, while Albert de Larrazabal, Globe
CFO, was hailed Best CFO.
These honors affirm the Company’s deliberate commitment to the principles of good governance
and transparency with its key stakeholders while it constantly find ways to improve business given
the challenging times.
Enterprise Risk Management
Cognizant of the dynamism of the business and the industry and in line with its goal to
continuously enhance value for its stakeholders, Globe Telecom has put in place a robust risk
management approach that is fully integrated in its strategy planning, execution and day-to-day
operations.
Risk Management Approach
As part of its strategy management calendar, senior management and key leaders regularly
conduct an enterprise–wide assessment of risks focused on identifying the key risks that could
threaten the achievement of Globe’s business objectives, both at the corporate and business unit
level, as well as specific plans to mitigate or manage such risks.
Risks are prioritized, depending on their impact to the overall business and the effectiveness by
which these are managed. Risk mitigation strategies are developed, updated and continuously
reviewed for effectiveness, and are also monitored through various control mechanisms.
Globe employs a two-dimensional view of risk monitoring. Senior Management’s scorecard
includes the status of risk mitigation plans as they relate to the attainment of a particular business
objective. Enterprise
SEC Form 17A 2010
124
Risk Owners, on the other hand, regularly monitor and report the status of the approved
mitigation plans meant to address the key risks.
Annually, Globe conducts an Enterprise Risk Management Performance Evaluation which serves
as a basis for continuously improving our Risk Management processes and capabilities.
Roles and Responsibilities
The Board of Directors, supported by the Executive Committee (Excom) and Audit Committee,
has an oversight role over the Company’s risk management activities and approves Globe’s risk
management policies. The Excom covers specific non-financial (e.g., strategic, operational,
human capital, regulatory) risks, while the Audit Committee provides oversight of financial
reporting risks.
The Chief Financial Officer supports the President, as the overall risk executive, in overseeing the
risk management activities of the Company, ensuring that the responsibilities for managing
specific risks are clear, the level of risk accepted by the Company is appropriate, and that an
effective control environment exists for the Company as a whole.
Risk Owners at the senior executive level have been identified and made accountable for
managing specific risks, supported by business process owners who have been designated,
trained, and made responsible for the particular process or activity from which the risk arises. This
is consistent with management’s belief that risks are best understood and managed by the
employees who are closest to the process.
The Enterprise Risk Management unit, under the Office of Strategy Management, facilitates the
enterprise risk management activities, bringing these closer to and more aligned with the
Company’s strategic planning and execution framework. This also supports the integration of
enterprise risk management with the Company’s scorecard processes and more tightly link risk
mitigation efforts with its day-to-day operations.
In addition to this overall risk management framework, Globe Telecom, through its Enterprise
Business Continuity Risk Management Office, has put in place an enterprise-wide program to
focus continuously on managing incidents and ensure business continuity immediately after a
significant disruption. During its inception in 2008, Globe adapted the business continuity
methodology and framework of the Business Continuity Management Institute (BCMI) of
Singapore. In 2009, it implemented the Good Practices Guidelines of the Business Continuity
Institute, which is a Management Guide to implementing global best practices on business
continuity management. And in 2010, Globe Telecom continued to improve its existing business
continuity capability by conducting a full review of the program and started aligning it with British
Standards (BS) 25999, the leading international standard on business continuity management,
and by giving emphasis on emergency response, recovery from natural calamities and overall
crisis management.
Globe continues to identify and address single points of failure in its network and support facilities
to make them less vulnerable to failures. It has invested in technology that will ensure network
resiliency and disaster-preparedness. Enhancements are currently being made on the
international network and in strengthening core network elements as well as investments in
emergency power.
Over the past year, Globe continued to ensure uninterrupted services in mission-critical sites in
baluarte areas, making certain that the area can withstand the effects of typhoons. Proof of our
disaster-preparedness was our network performance in the midst of Typhoon Juan (international
name, Megi) in October. Part of the disaster-preparedness efforts included acquiring the
necessary tools and conducting typhoon and flooding drills months before the start of the typhoon
season to make disaster recovery teams more prepared for typhoons and floods. Globe also
created Regional Crisis Management Teams in North and South Luzon, the most typhoon/floodprone regions in the country, while continuing to improve its crisis communication process,
community disaster response programs, and overall regional crisis management program.
Business continuity preparedness involves all levels of the organization. In extreme weather
conditions, updates and alerts about incoming typhoons are regularly issued not just to disaster
SEC Form 17A 2010
125
response teams but also to senior executives, members of the Crisis Management Team and
members of the Business Continuity Core Team to ensure uniformity and consistency of
response. Post-typhoon meetings are held to identify gaps and lessons learned and
corresponding improvements, and report these to senior executives led by the President and to
the Executive Committee.
Since business continuity management is a journey, Globe has trained and continues to train
those who are involved in the program, and conducts awareness campaigns. In 2010, a training
based on British Standard 25999 was held for network engineers and IT experts who develop
Disaster Recovery Plans. Members of Emergency Response Teams in corporate offices and
mission-critical technical sites were trained on Emergency Response and First Aid. The
“BeAware, Prepare” business continuity awareness campaign was launched even as we continue
to orient new employees on safety and business continuity.
All these made the Globe organization and its people more resilient to crisis and natural disasters.
By embedding Business Continuity in our way of life, Globe became even more responsive to its
customers’ needs at the most critical times.
The May 2010 First Automated Elections was another opportunity to serve and showcase the
reliability of the Globe network. Around 35,000 SIMs were distributed and used by the PCOS
machines, mostly in the Luzon area. 117 DSL sites in the Visayas and Mindanao canvassing
centers were used to transmit consolidated returns to the canvassing centers. To ensure security
and accuracy of data transmission, four vital sites were linked to the Main Data Center where
Smartmatic servers were located. Among them are the Back Up Data Center provided by PLDT,
the Comelec Data Center at the PICC, the Congress and the KBP Center at Pope Pius at UN
Avenue. More than 3,000 sites nationwide were used to service the PCOS machines, all of which
were operational during the elections, earning a commendation and a thank you from Comelec
and Smartmatic.
Typhoons Basyang and Juan gave Globe the chance to give back to the community. In the days
prior to Basyang’s landfall, Globe North Luzon teams ensured advanced deployment of gensets
to mission-critical sites, augmented manpower and delivered fuel to all sites across the region.
Globe activated the HQ Command Center, Regional Crisis Management Team and the Disaster
Recovery Teams, while working with vendors and contractors to ensure sufficient supplies. Even
as Typhoon Basyang hit earlier than expected and affected GMA instead of Northern Luzon,
Globe teams, also relying on international weather bureaus, made the necessary adjustments
and preparation.
When Typhoon Juan struck the country, Globe teams delivered all the necessary machines and
extra manpower to be able to respond well. Within twenty-six hours, 64% of affected sites were
restored and Globe was the only telecommunications provider that worked in Tuguegarao in the
immediate two hours after the onslaught of Juan.
Business continuity and uninterrupted service is just one of the marks of Globe making a
difference in the consumer’s life. It also extends to being there first and fast, while ensuring
service performance.
SEC Form 17A 2010
126
Audit and Internal Controls
Internal Audit
It is the policy of Globe Telecom to establish and support an Internal Audit function as a
fundamental part of its corporate governance practices. Internal audit is a service, providing an
independent, objective assurance and consulting function within Globe Telecom, and sharing the
organization’s common goal of creating and enhancing value for its stakeholders, through a
systematic approach in evaluating the effectiveness of the Company’s risk management, internal
control and governance processes. The Audit Committee regards its relationship with Globe
Internal Audit having a vital role in supporting the Committee in the effective discharge of its
oversight role and responsibilities.
The Internal Audit Group performs its auditing functions faithfully by maintaining independence
from management and controlling shareholders as it reports functionally to the Board, through the
Audit Committee, and administratively, to the President & CEO.
The Internal Audit Group maintains, reviews and assesses the adequacy of its Charter annually to
ensure compliance with regulatory requirements and appropriateness for enabling good corporate
governance. Any amendments to the Charter are submitted to the Audit Committee and Board
approval.
Globe Internal Audit adopts a risk-based audit approach in developing its annual work plan, reassessed quarterly to consider emerging risks and the changing dynamics of the
telecommunications industry. The Audit Committee reviews and approves the annual work plan
and all deviations, and ensures that internal audit examinations cover at least the evaluation of
adequacy and effectiveness of controls encompassing the Company’s governance, operations,
information systems, reliability and integrity of financial and operational information, effectiveness
and efficiency of operations, safeguarding of assets, and compliance with laws, rules, and
regulations. The Audit Committee also ensures that audit resources are reasonably allocated to
and focused on the areas of highest risk.
The Committee meets with the internal auditors, and discusses the results of their audits,
ensuring that management is taking appropriate corrective actions in a timely manner, including
addressing internal controls, regulatory and compliance issues. The Committee also receives
periodic reports on the status of internal audit activities, key performance indicators’
accomplishments, and quality assurance and improvement programs.
Globe Internal Audit governs its activities in conformance with the International Standards for the
Professional Practice of Internal Auditing (the “Standards”), the Institute of Internal Auditor’s Code
of Ethics, and the Company’s Code of Conduct. In 2007, the group subjected its activities to an
external Quality Assurance Review (QAR) which resulted to a “Generally Conforms” rating, the
highest rating that can be achieved in the QAR process, confirming that internal audit activities
are conducted in conformance with the Standards.
As an advocate of the principles of good corporate governance, Globe Internal Audit worked
together with the Institute for Solidarity in Asia (ISA) which assists public sector organizations to
improve their governance practices and raise them to global standards through the PGS and The
Institute of Internal Auditors in validating reported breakthrough transformations in one of the
Government - Owned and Controlled Corporations. The results of the validation were considered
by ISA in assessing the corporation’s eligibility for conveying upon it a Performance Governance
System (PGS), a globally recognized framework and an action-based, measurable and timebound program designed to make organizations perform and execute strategy successfully. It is a
local adaptation of the Balanced Scorecard applied to the public sector, to track the agencies’
performance against a set of goals.
Last August 2010, Globe’s Internal Audit also played host to the 7th Regional Chief Audit
Executives (CAE) Forum for Singapore Telecommunications (SingTel) and its affiliates held at the
Shangri-La Mactan Resort & Spa in Cebu City. The forum was attended by delegates from
SingTel’s various regional affiliates such as AirTel (India), Optus (Australia), Warid (Pakistan),
SEC Form 17A 2010
127
AIS (Thailand), as well as delegates from SingTel, Globe and Ayala Corporation with the theme
“P.R.I.M.E. for Excellence” (Prepare, Refocus, Immerse, Manage, Execute).
The annual Regional CAE Forum is one of the established regional events since 2004 that aims
to gather the Heads and key officers of internal audit teams of SingTel and its regional affiliates to
promote synergies and relationship building through sharing of knowledge, thought leadership,
experiences, and good practices on risk management, internal control and corporate governance.
Globe Internal Audit has also actively participated in sharing good practice of internal auditing and
corporate governance through various external speaking engagements and attendance to forums
and other related events.
In 2009, Globe was featured in the first project of the Asian Confederation of IIA (ACIIA) entitled
Governance, Risk Management and Control: Internal Audit Leading Practices, Case Studies in
Asia”, the first book published by ACIIA (a confederation of 14 IIA affiliates in the Asia Pacific
region*). Aligned with the resolve of the Company to uphold the principles of good governance,
Globe Internal Audit shares its practices on corporate governance and internal auditing.
Geared towards excellence, the Internal Audit Group provides for continuing personal and
professional development for all auditors through its Learning Ladder Framework to equip them
in the conduct of reviews, with focus on acquiring familiarity with Globe internal processes and
telecom technology, new accounting and auditing standards, fraud investigation skills, and
regulatory updates.
External Audit
The Company engages the services of independent auditors to conduct an audit and obtain
reasonable assurance on whether the financial statements and relevant disclosures are free from
material misstatements. The independent auditors are directly responsible to the Audit Committee
in helping ensure the integrity of the Company’s financial statements and reporting process.
It is the practice of the company every three (3) years to tender bid for the external audit services
of independent auditors and on an annual basis conducting the independent auditor’s
performance appraisal. From the results, the Audit Committee evaluates and proposed to the
Board for endorsement and approval of the shareholder, the appointment of the independent
auditors. The endorsement is submitted to the shareholders for approval at the ASM. The
representatives of the independent auditors are expected to be present at the ASM and have the
opportunity to make a statement on the Company’s financial statements and results of operations
if they desire to do so. The auditors are also expected to be available to respond to appropriate
questions during the meeting.
SyCip, Gorres, Velayo & Company (SGV & Co.) is the appointed independent auditors for Globe
Telecom, Inc, and its subsidiaries. In accordance with regulations issued by the SEC, the audit
partner principally handling the Company’s account is rotated every five (5) years or sooner. The
most recent rotation occurred in 2007.
There were no disagreements with the Company’s independent auditors on any matter of
accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
Fees approved in connection with the audit services rendered by SGV & Co., pursuant to the
regulatory and statutory requirements amounted to P15.95 million for the years ended 31
December 2010 and 2009.
In addition to performing the audit of Globe Group’s financial statements, SGV & Co. was also
selected, in accordance with established procurement policies, to provide other services in 2010
and 2009.
The Audit Committee has an existing policy to review and to pre-approve the audit and non-audit
services rendered by the Company’s independent auditors. It does not allow the Globe Group to
engage the independent auditors for certain non-audit services expressly prohibited by SEC
regulations to be performed by an independent auditor for its audit clients. This is to ensure that
SEC Form 17A 2010
128
the independent auditors maintain the highest level of independence from the Company, both in
fact and appearance.
The Audit Committee has reviewed the nature of non-audit services rendered by SGV & Co. and
the corresponding fees and concluded that these are not significant to impair the independence of
the auditors.
The aggregate fees billed by SGV & Co. are shown below (with comparative figures for 2009):
In Millions of Pesos
Audit and Audit-Related Fees
Non-Audit Fees
Total
P
P
2010
15.95
3.25
19.20
2009
P
P
15.95
0.05
16.00
Audit Fees. This includes audit of Globe Group’s annual financial statements and review of
quarterly financial statements in connection with the statutory and regulatory filings or
engagements for the years ended 2010 and 2009. This also includes assurance and related
services that are reasonably related to the performance of the audit or review of the Globe
Group’s financial statements pursuant to the regulatory requirements.
Non-Audit Fees. This includes special projects, trainings and seminars rendered by the SGV &
Co and its affiliates.
The fees presented above include out-of-pocket expenses incidental to the independent auditor’s
services.
Pursuant to the Pre-Approval of Audit and Non-Audit Services policy, the Audit Committee has
reviewed the nature of non-audit services rendered by SGV & Co. and the corresponding fees
and concluded that these are not in conflict with the audit functions of the independent auditors.
Xavier P. Loinaz is the Chairman of the Audit Committee while Tay Soo Meng and Romeo L.
Bernardo are members. Tay Soo Meng was elected to the Board on 8 February 2011 to serve
the remainder of the term of Koh Kah Sek who stepped down from the Board on 2 January 2011.
Responsible Tax Payment
Globe recognizes and follows Philippine tax rules and regulations. The organization pays the right
amount of tax legally due to the government and observes all applicable rules and regulations in
the country in a timely manner. The organization’s employees, consultants and business partners
are expected to treat with integrity all matters pertaining to tax activities.
Financial Reporting
The annual audited consolidated financial statements of Globe Telecom and its subsidiaries have
been prepared in accordance with PFRS, which are aligned with International Financial Reporting
Standards.
Management has the primary responsibility for the financial statements and the financial reporting
process.
The independent auditors are directly responsible to the Audit Committee in helping ensure the
integrity of the Company’s financial statements and relevant disclosures, and for expressing an
opinion on Globe Group’s annual audited consolidated financial statements. As part of its
oversight responsibility, the Audit Committee, with the assistance of the internal auditors, reviews
the financial statements and all related disclosures and endorses these to the Board for approval.
The financial statements comprise of the consolidated statements of financial position,
consolidated statements of comprehensive income, consolidated statements of changes in equity,
and consolidated statements of cash flows.
Information showing the performance of the wireless and fixed line segments is also disclosed to
show their respective contributions to total corporate performance. Finally, the financial
SEC Form 17A 2010
129
statements also include a detailed discussion of the Company’s significant accounting policies
and other explanatory notes.
Dealings in Securities
Globe has adopted strict policies and guidelines for trades involving the Company’s shares made
by key officers and those with access to material non-public information. Key officers and those
with access to the quarterly results in the course of its review are prohibited from trading in
Globe’s shares starting from the time when quarterly results are internally reviewed until after
Globe publicly discloses its results. Notices of trading blackouts are regularly issued to the
officers concerned and compliance is monitored by the Corporate and Legal Services Group.
Also, all key officers are required to submit a report on their trades to a designated compliance
officer, for submission to the SEC in accordance with the Securities Regulation Code.
Ownership Structure
Globe Telecom regularly discloses the top 20 shareholders of the common and preferred equity
securities of the Company. Disclosure is also made of the security ownership of certain record
and beneficial owners who hold more than 5% of the Company’s common and preferred shares.
Finally, the shareholdings and percentage ownership of the directors and key officers are
disclosed in the Definitive Information Statement sent to the shareholders prior to the ASM.
The following are the major shareholders of Globe Telecom as of December 31, 2010:
Common
Shares
% of
Common
Preferred
Shares
% of
Preferred
shares
Total
% of
Total
Ayala Corp.
40,319,263
30.47%
0
-
40,319,263
13.86%
SingTel
62,646,486
47.33%
0
-
62,646,486
21.54%
Asiacom
0
0
158,515,021
100%
158,515,021
54.50%
Public*
29,382,724
22.20%
0
-
29,382,724
10.10%
Total
132,348,473
100%
158,515,021
100%
290,863,494
100%
Stockholders
* Including shares held by Globe Directors, Officers, and Employees thru Executive Stock Option Plan
Shareholder Relations
Globe Telecom recognizes the importance of regular communication with its investors, and is
committed to high standards of disclosure, transparency, and accountability. The Company aims
to provide a fair, accurate, and meaningful assessment of the Company’s financial performance
and prospects through the annual report, quarterly financial reports, and analyst presentations.
The Company’s quarterly financial results are disclosed to the SEC and Philippine Stock
Exchange (PSE) within 24 hours from their approval by the Board. The Company also files its
quarterly and year-end financial statements and the detailed management’s discussion and
analysis within forty-five (45) and one hundred and five (105) calendar days respectively from the
end of the financial period covered by the report, in compliance with the financial reporting and
disclosure requirements of the SEC and the PSE. These reports are also made available to the
analysts immediately upon confirmation by the SEC of receipt of disclosure, and are posted on
the Company’s website.
Additionally, any material, market-sensitive information such as dividend declarations are also
disclosed to the SEC and PSE, as well as released through various media including press
releases and Company website posting. The Company regularly holds analysts and media
briefings to discuss the quarterly financial results. A conference call facility is set up during these
briefings to enable wider participation. The company also participates in both local and
international investor conferences as part of its investor communications program.
The Company likewise holds an annual stockholders’ meeting where shareholders are given the
opportunity to raise questions and clarify issues relevant to the Company. The Board, President &
CEO, members of management, and external auditors are present to address any questions
SEC Form 17A 2010
130
raised at these meetings. Enquiries by shareholders, whether by telephone, mail, or electronic
mail, are dealt with as promptly as possible. Shareholders, investors, and the public may also
access the Company’s website (http://www.globe.com.ph) to obtain information on the Company.
Employee Relations
Life in Globe is as dynamic as the industry we are in. We are each one’s Ka-Globe, striving to
constantly deliver superior and quality service to our customers. Whether we are serving our
subscribers in our stores, delivering customized solutions to our enterprise and corporate clients,
or ensuring quality of our network and information technology systems, we believe that our
business lies at the heart of transforming and enriching lives.
a. Building and Sustaining Talent Capability
Globe takes pride in ensuring that our partners- the employees, get the best retention, training
and development programs. Through fostering a culture of excellence in performance and
recognizing these with rewards, we are consistent in the message of Customer First; after all,
employees are the organization’s internal customers.
In the past year, the Human Resources group led in tracking and monitoring productivity through
decision-making and manpower rationalization, with the intent of ensuring cost-effectiveness
across the organization.
Globe is proud to have people who make a difference. In 2010, Talent and Career Management
designed implemented various career development initiatives for key executives and talents.
•
•
•
•
The Ayala Leadership Acceleration Program (LEAP) paved the way for leadership
development and coaching straight from Ayala and Harvard executives.
In partnership with the Harvard Business School Publishing, HR designed the Globe
Emerging Leaders (GEL) program to provide executives and key talents the latest
management best practice tools.
Senior executives also participated in Game for Global Growth (GGG), a one-year
development program for senior executives in the telco industry, which was also designed for
SingTel affiliates.
Key talents and other executives also went through a one-week course called Regional
Leadership in Action (RLA), which focuses on leadership soft skills and business acumen,
designed specifically for the SingTel group.
The Talent and Career Management group also launched the company’s online Performance
Management System, highlighting the Planning and Performance Evaluation (PPE) form that
allows employees and their immediate supervisors to document, track, and evaluate performance
throughout the year.
The design and implementation of our Total Rewards and Benefits programs were enhanced to
align with the performance-driven culture in Globe. The company’s Flexible Benefits program
called myChoice introduced more options for flexing and points conversion, enabling employees
to design their benefits according to personal needs. HR also reviewed and updated the salary
structure to ensure market competitiveness. Furthermore, Globe designed differentiated incentive
plans anchored on group metrics and deliverables to better recognize the contribution of each
employee in the attainment of corporate targets. In the past year, there was an increase in the
number of management-initiated promotions, to recognize and reward high-performers.
The combined strengths of Organization Development, HR Communications and Employee
Programs paved the way for successful culture- building programs.
In the past year, Globe has successfully launched The Globe Way, the company’s new credo
and way of life that embodies collective values and aspirations. To further experience The Globe
Way, a road show called I Love Globe Caravan was done to showcase various perks and
privileges exclusive to employees. To sustain and to capitalize these new core values, The Globe
Way Awards was held to recognize individuals and teams whose exemplary behavior, values
SEC Form 17A 2010
131
and achievements best demonstrated The Globe Way. The Employee Satisfaction Survey
gathers indicators that drive employee engagement in Globe, and results showed that we are still
above the baseline score.
b. Employee Engagement Through Volunteerism
While our people keep up with the rapid pace of their daily endeavors in the Company, we take
pride in our collective and relentless efforts to be of service not only to the customer but to the
larger society and community. In 2010, Globe employees devoted a total of 7,818 hours to take
part in various outreach and volunteer activities that included building homes and schools,
teaching out-of-school youths, reforestation and cleanup initiatives, and other socially-relevant
programs in partnership with our flagship corporate social responsibility program, Globe
BridgeCom.
c. Forging Healthy Labor Relations
Globe employs 5,667 active regular employees as of December 31, 2010, of which 513 or around
9% are covered by a Collective Bargaining Agreement (CBA) with the Globe Telecom Employees’
Union – Federation of Free Workers (GTEU-FFW). The Company maintains a mutually
supportive relationship with the GTEU-FFW as demonstrated in joint projects and initiatives that
affect its members at large.
SEC Form 17A 2010
132
PART V – EXHIBITS AND SCHEDULES
A. Exhibits – Please see accompanying Index to Exhibits in the following pages
B. Reports on SEC Form 17-C - The Company regularly files various reports on SEC Form 17C relative to various company disclosures. Of these, the more significant ones are as follows:
Date
Feb 4, 2010
Feb 15, 2010
Mar 19, 2010
April 12, 2010
May 7, 2010
May 13, 2010
June 29, 2010
July 6, 2010
Aug 3, 2010
Oct 1, 2010
Oct 8, 2010
Nov 18, 2010
Dec 08, 2010
Dec 30, 2010
SEC Form 17A 2010
Title
Declaration of first semi-annual cash dividend
P2 Billion Term Loan Facility with Allied Banking Corp.
Executive Appointment of Alberto M. de Larrazabal as CFO and Treasurer of
Globe Telecom, Inc.
Appointment of Atty. Solomon M. Hermosura as Acting Corporate Secretary
and Atty. Marisalve Ciocson-Co as Assistant Corporate Secretary
Appointment of Peter Bithos as Advisor for Consumer Customer Facing Unit
(CFU)
Certification of Independent Directors
Appointment of Atty. V. Froilan M. Castelo as OIC for Corporate and Legal
Services
Appointment of Atty. Solomon M. Hermosura as Corporate Secretary and Atty.
Marisalve Ciocson-Co as Compliance Officer
Declaration of second semi-annual cash dividend
Resignation of Mark Chong Chin Kok
Appointment of Hui Weng Cheong to the Board of Directors
P4 Billion Term Loan Facility with Metropolitan Bank & Trust Company
(Metrobank)
Appointment of Robert Tan as Chief Technical Advisor
Resignation of Koh Kah Sek
134
INDEX TO EXHIBITS
Description of Exhibit
Statement of Management’s Responsibility
Report of Auditors and Consolidated Financial Statements and
Notes to Consolidated Financial Statements
Independent Auditors’ Report on the Supplementary Schedules
Short Term Investments
Amounts Receivable from Directors, Officers, Employees, Related
Parties and Principal Stockholders Other Than Affiliates
Long-Term Investments in Securities (Non-current Marketable
Securities, Other Long Term Investments in Stocks and Other
Investments)
Deferred Charges and Others
Long Term Debt
Indebtedness to Related Parties (Other Long term Liabilities)
Capital Stock (Specimen of stock certificate)
Plan of Acquisition, Reorganization, Arrangements, Liquidation or
Succession
Instruments Defining the Rights of Security Holders, Including
Indentures
Voting Trust Agreement
Material Contracts
Schedule of Unappropriated Retained Earnings as of 12/31/2009
Annual Report to Security Holders
Letter re: Director Resignation
Report Furnished to Security Holders
Subsidiaries to Registrant
Published Report Regarding Matters Submitted to a Vote of
Security Holders
Consent of Experts and Independent Counsel
Power of Attorney
Remarks/Attachment
√
√
√
*
√
*
√
√
*
√
*
*
*
*
√
√
√
*
*
*
*
*
Note: * The exhibits are either Not Applicable to the Company or require No Answer.
SEC Form 17A 2010
135
Globe Telecom, Inc. and Subsidiaries
Consolidated Financial Statements
December 31, 2010, 2009 and 2008
and
Independent Auditors’ Report
SyCip Gorres Velayo & Co.
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891 0307
Fax:
(632) 819 0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditation No. 0012-FR-2
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
Globe Telecom, Inc.
We have audited the accompanying consolidated financial statements of Globe Telecom, Inc. and
Subsidiaries, which comprise the consolidated statement of financial position as at
December 31, 2010, 2009 and 2008, and the consolidated statements of comprehensive income,
consolidated statements of changes in equity and consolidated statements of cash flows for the years
then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Philippine Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
*SGVMC114676*
A member firm of Ernst & Young Global Limited
-2We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of Globe Telecom, Inc. and Subsidiaries as of December 31, 2010, 2009 and 2008,
and its financial performance and its cash flows for the years then ended in accordance with Philippine
Financial Reporting Standards.
SYCIP GORRES VELAYO & CO.
Arnel F. de Jesus
Partner
CPA Certificate No. 43285
SEC Accreditation No. 0075-AR-1
Tax Identification No. 152-884-385
BIR Accreditation No. 08-001998-15-2009,
September 30, 2009, Valid until September 29, 2012
PTR No. 2641517, January 3, 2011, Makati City
February 8, 2011
*SGVMC114676*
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31
2009
(In Thousand Pesos)
Notes
2010
ASSETS
Current Assets
Cash and cash equivalents
Short-term investments
Receivables - net
Inventories and supplies
Derivative assets
Prepayments and other current assets - net
Total Current Assets
Assets classified as held for sale
28, 30
28
4, 28
5
28
6, 28
P
=5,868,986
–
8,374,123
1,839,333
19,888
4,704,198
20,806,528
778,321
21,584,849
=5,939,927
P
2,784
6,583,228
1,653,750
36,305
4,199,320
18,415,314
–
18,415,314
=5,782,224
P
–
7,473,346
1,124,322
169,012
5,106,429
19,655,333
–
19,655,333
Noncurrent Assets
Property and equipment - net
Investment property - net
Intangible assets and goodwill - net
Investments in joint ventures
Deferred income tax - net
Other noncurrent assets - net
Total Noncurrent Assets
7
8
9
10
24
11,18
101,837,254
214,192
3,248,376
197,016
670,594
2,875,686
109,043,118
P
=130,627,967
101,693,868
236,739
2,982,856
233,800
742,538
3,338,410
109,228,211
=127,643,525
P
93,540,390
259,223
3,338,796
73,529
523,722
2,360,195
100,095,855
=119,751,188
P
12, 18, 28
13
28
24
4
14, 28
P
=22,115,203
224,388
93,336
1,098,492
2,402,749
–
=20,838,681
P
89,404
85,867
1,107,721
2,981,880
2,000,829
=17,032,474
P
202,514
163,989
1,237,969
3,247,711
4,002,160
14, 28
15, 28
8,677,209
–
34,611,377
5,667,965
803,617
33,575,964
7,742,227
99,145
33,728,189
25.4
697,729
35,309,106
–
33,575,964
–
33,728,189
24
14, 28
28
15, 28
4,620,490
41,694,261
152,529
1,982,453
48,449,733
83,758,839
4,627,294
39,808,057
6,589
1,916,707
46,358,647
79,934,611
4,590,429
28,843,711
21,665
2,475,639
35,931,444
69,659,633
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued expenses
Provisions
Derivative liabilities
Income tax payable
Unearned revenues
Notes payable
Current portion of:
Long-term debt
Other long-term liabilities
Total Current Liabilities
Liabilities directly associated with the assets
classified as held for sale
Noncurrent Liabilities
Deferred income tax - net
Long-term debt - net of current portion
Derivative liabilities
Other long-term liabilities - net of current portion
Total Noncurrent Liabilities
Total Liabilities
Equity
Paid-up capital
Cost of share-based payments
Other reserves
Retained earnings
Total Equity
25.4
17
16, 18
17, 28
17
33,946,004
544,794
(88,310)
12,466,640
46,869,128
P
=130,627,967
33,912,158
468,367
18,518
13,309,871
47,708,914
=127,643,525
P
2008
33,861,398
386,905
(35,382)
15,878,634
50,091,555
=119,751,188
P
See accompanying Notes to Consolidated Financial Statements.
*SGVMC114676*
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Notes
REVENUES
Service revenues
Nonservice revenues
Interest income
Others - net
Gain on disposal of property
and equipment - net
COSTS AND EXPENSES
General, selling and administrative
Depreciation and amortization
Cost of sales
Financing costs
Impairment losses and others
Equity in net losses of joint ventures
P
=62,554,689
2,993,301
218,532
856,941
66,623,463
=62,443,518
P
1,418,614
271,806
1,064,476
65,198,414
=62,894,488
P
1,923,560
420,425
700,874
65,939,347
7, 29
52,449
66,675,912
608,400
65,806,814
24,837
65,964,184
21
7, 8, 9, 29
5
22, 29
23
10, 29
26,692,104
18,085,839
4,238,960
2,068,401
1,549,448
2,968
52,637,720
24,496,882
17,388,430
2,947,950
2,182,881
810,960
7,009
47,834,112
23,757,126
17,028,068
3,117,172
3,000,391
1,205,679
9,728
48,118,164
14,038,192
17,972,702
17,846,020
16
19, 29
20
INCOME BEFORE INCOME TAX
PROVISION FOR (BENEFIT FROM)
INCOME TAX
Current
Deferred
24
4,187,625
105,933
4,293,558
NET INCOME
OTHER COMPREHENSIVE INCOME
(LOSS)
Transactions on cash flow hedges - net
Changes in fair value of available-for-sale
investment in equity securities
Exchange differences arising from translations of
foreign investments
Tax effect relating to components of other
comprehensive income
9,744,634
5,583,809
(179,980)
5,403,829
12,568,873
7,268,584
(698,442)
6,570,142
11,275,878
17
TOTAL COMPREHENSIVE INCOME
Earnings Per Share
Basic
Diluted
Cash dividends declared per common share
Years Ended December 31
2009
2008
2010
(In Thousand Pesos, Except Per Share Figures)
(133,257)
25,040
(310,099)
20,150
14,553
(19,734)
(33,698)
24,682
1,508
39,977
(106,828)
(10,375)
53,900
108,535
(219,790)
P
=9,637,806
=12,622,773
P
=11,056,088
P
P
=73.63
P
=73.12
P
=80.00
P94.59
=
=94.31
P
=114.00
P
P84.75
=
=84.61
P
=125.00
P
27
17
See accompanying Notes to Consolidated Financial Statements.
*SGVMC114676*
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Notes
Capital
Stock
(Note 17)
Cost of
Additional Share-Based
Payments
Paid-in
(Note 16.5)
Capital
Other
Reserves
(Note 17)
Retained
Earnings
Total
For the Year Ended December 31, 2010 (In Thousand Pesos)
As of January 1, 2010
Total comprehensive income (loss) for
the year
Dividends on common stock
Cost of share-based payments
Exercise of stock options
As of December 31, 2010
17.3
18.1
17.2
= 7,409,079
P
P
= 26,503,079
= 468,367
P
–
–
–
144
= 7,409,223
P
–
–
–
33,702
P
= 26,536,781
–
–
104,788
(28,361)
= 544,794
P
= 18,518
P
P
= 13,309,871
P
= 47,708,914
(106,828)
9,744,634
9,637,806
– (10,587,865) (10,587,865)
–
–
104,788
–
–
5,485
(P
= 88,310) =
P12,466,640 P
= 46,869,128
For the Year Ended December 31, 2009 (In Thousand Pesos)
As of January 1, 2009
Total comprehensive income for the year
Dividends on:
Common stock
Preferred stock
Cost of share-based payments
Collection of subscriptions receivable
Exercise of stock options
As of December 31, 2009
=7,408,075
P
–
P
=26,453,323
–
=386,905
P
–
–
–
–
732
272
=7,409,079
P
–
–
–
–
49,756
P
=26,503,079
–
–
126,437
–
(44,975)
=468,367
P
(P
=35,382) =
P15,878,634
53,900
12,568,873
P
=50,091,555
12,622,773
17.3
18.1
17.2
–
–
–
–
–
=18,518
P
(15,087,144) (15,087,144)
(50,492)
(50,492)
–
126,437
–
732
–
5,053
P
=13,309,871 P
=47,708,914
For the Year Ended December 31, 2008 (In Thousand Pesos)
As of January 1, 2008
Total comprehensive income (loss) for
the year
Dividends on:
Common stock
Preferred stock
Cost of share-based payments
Collection of subscriptions receivable
Exercise of stock options
As of December 31, 2008
=7,367,002
P
P
=26,353,378
=306,358
P
–
–
–
–
–
–
40,742
331
=7,408,075
P
–
–
–
–
99,945
P
=26,453,323
=184,408
P
P
=21,205,664
P
=55,416,810
(219,790)
11,275,878
11,056,088
17.3
18.1
17.2
–
–
182,324
–
(101,777)
=386,905
P
– (16,542,271) (16,542,271)
–
(60,637)
(60,637)
–
–
182,324
–
–
40,742
–
–
(1,501)
(P
=35,382) =
P15,878,634 P
=50,091,555
See accompanying Notes to Consolidated Financial Statements.
*SGVMC114676*
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation and amortization
Interest expense
Provisions for (reversals of) other probable losses
Cost of share-based payments
Impairment losses (reversal of impairment losses)
on property and equipment
Loss (gain) on derivative instruments
Equity in net losses of a joint venture
Dividend income
Gain on disposal of property and equipment
Foreign exchange losses (gains) - net
Interest income
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
Cash generated from operations
Income tax paid
Net cash flows provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to:
Property and equipment
Intangible assets
Proceeds from sale of property and equipment
Decrease (increase) in:
Short-term investments
Held-to-maturity investments
Other noncurrent assets
Acquisition of subsidiaries
Dividend received
Interest received
Net cash flows used in investing activities
2010
P
=14,038,192
7, 8, 9
22
23
16, 18
23
22
10
7
20, 22
19
7,30
9
9
Years Ended December 31
2009
(In Thousand Pesos)
=17,972,702
P
2008
=17,846,020
P
18,085,839
1,981,785
138,760
104,787
17,388,430
2,096,945
(88,047)
126,437
17,028,068
2,255,878
(5,031)
182,324
83,040
36,570
2,968
(2,366)
(52,449)
(501,500)
(218,532)
33,697,094
85,631
64,547
7,009
(592)
(608,400)
(286,530)
(271,806)
36,486,326
(31,172)
(105,642)
9,728
(27)
(24,837)
759,299
(420,425)
37,494,183
(1,932,420)
(185,583)
(438,808)
833,760
(529,428)
754,837
(751,361)
(12,176)
(2,482,801)
1,007,956
(579,131)
(314,998)
31,254,110
(4,105,733)
27,148,377
1,617,432
(265,831)
68,345
38,965,441
(5,589,227)
33,376,214
(2,778,052)
1,381,180
(818,774)
32,032,199
(7,117,556)
24,914,643
(17,552,246)
(169,329)
113,258
(20,988,768)
(99,164)
58,145
(18,754,502)
(196,052)
137,124
2,784
–
482,918
–
2,366
191,436
(16,928,813)
(2,784)
–
(863,889)
(141,330)
592
208,094
(21,829,104)
500,000
2,350,032
(619,397)
(351,499)
27
352,990
(16,581,277)
(Forward)
*SGVMC114676*
-2-
Notes
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings:
Long-term
Short-term
Repayments of borrowings:
Long-term
Short-term
Payments of dividends to stockholders:
Common
Preferred
Collection of subscriptions receivable and exercise of
stock options
Interest paid
Net cash flows used in financing activities
Years Ended December 31
2009
(In Thousand Pesos)
2008
14
14
17
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
NET FOREIGN EXCHANGE DIFFERENCE
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS AT
END OF YEAR
2010
28, 30
P
=14,181,967
1,000,000
=18,629,170
P
2,000,000
=11,500,000
P
6,603,375
(8,986,275)
(3,000,829)
(9,820,330)
(4,001,330)
(4,814,990)
(3,100,540)
(10,587,865)
(50,492)
(15,087,144)
(60,637)
(16,542,271)
(49,449)
5,485
(2,734,000)
(10,172,009)
5,785
(3,009,233)
(11,343,719)
39,241
(2,407,243)
(8,771,877)
47,555
203,391
(438,511)
(118,496)
(45,688)
29,731
5,939,927
5,782,224
6,191,004
P
=5,868,986
=5,939,927
P
=5,782,224
P
See accompanying Notes to Consolidated Financial Statements.
*SGVMC114676*
GLOBE TELECOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Globe Telecom, Inc. (hereafter referred to as “Globe Telecom”) is a stock corporation organized
under the laws of the Philippines, and enfranchised under Republic Act (RA) No. 7229 and its
related laws to render any and all types of domestic and international telecommunications services.
Globe Telecom is one of the leading providers of digital wireless communications services in the
Philippines under the Globe and Touch Mobile (TM) brand using a fully digital network. It also
offers domestic and international long distance communication services or carrier services. Globe
Telecom’s principal executive offices are located at 5th Floor, Globe Telecom Plaza, Pioneer
Highlands, Pioneer corner Madison Streets, Mandaluyong City, Metropolitan Manila, Philippines.
Globe Telecom is listed in the Philippine Stock Exchange (PSE) and has been included in the PSE
composite index since September 17, 2001. Major stockholders of Globe Telecom include Ayala
Corporation (AC), Singapore Telecom, Inc. (STI) and Asiacom Philippines, Inc. None of these
companies exercise control over Globe Telecom.
Globe Telecom owns 100% of Innove Communications, Inc. (Innove). Innove is a stock
corporation organized under the laws of the Philippines and enfranchised under RA No. 7372 and
its related laws to render any and all types of domestic and international telecommunications
services. Innove holds a license to provide digital wireless communication services in the
Philippines. Innove also offers a broad range of wireline voice and data communication services,
including domestic and international long distance communication services or carrier services as
well as broadband internet services. Innove also has a license to establish, install, operate and
maintain a nationwide local exchange carrier (LEC) service, particularly integrated local telephone
service with public payphone facilities and public calling stations, and to render and provide
international and domestic carrier and leased line services.
Globe Telecom owns 100% of G-Xchange, Inc. (GXI), a corporation formed for the purpose of
developing, designing, administering, managing and operating software applications and systems,
including systems designed for the operations of bill payment and money remittance, payment and
delivery facilities through various telecommunications systems operated by telecommunications
carriers in the Philippines and throughout the world and to supply software and hardware facilities
for such purposes. GXI is registered with the Bangko Sentral ng Pilipinas (BSP) as a remittance
agent. GXI handles the mobile payment and remittance service using Globe Telecom’s network
as transport channel under the GCash brand. The service, which is integrated into the cellular
services of Globe Telecom and Innove, enables easy and convenient person-to-person fund
transfers via short messaging services (SMS) and allows Globe Telecom and Innove subscribers to
easily and conveniently put cash into and get cash out of the GCash system.
Globe Telecom acquired 100% of Entertainment Gateway Group Corporation (EGGC) and
EGGstreme (Hong Kong) Limited (EHL) (collectively referred here as “EGG Group”) on
June 26, 2008 (see Note 9). EGG Group is engaged in the development and creation of wireless
products and services accessible through telephones or other forms of communication devices.
EGGC is registered with the Department of Transportation and Communication (DOTC) as a
content provider.
*SGVMC114676*
-2Globe Telecom owns 100% of GTI Business Holdings, Inc. (GTI). The primary purpose of this
company is to invest, purchase, subscribe for or otherwise acquire and own, hold, sell or otherwise
dispose of real and personal property of every kind and description. GTI was incorporated on
November 25, 2008. In July 2009, GTI incorporated its wholly owned subsidiary, GTI
Corporation (GTIC), a company organized under the General Corporation Law of the State of
Delaware for the purpose of engaging in any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law. GTIC has not yet started commercial
operations as of December 31, 2010.
2. Summary of Significant Accounting Policies
2.1 Basis of Financial Statement Preparation
The accompanying consolidated financial statements of Globe Telecom and its wholly-owned
subsidiaries, collectively referred to as the “Globe Group”, have been prepared under the
historical cost convention method, except for derivative financial instruments and availablefor-sale (AFS) investments that are measured at fair value.
The consolidated financial statements of the Globe Group are presented in Philippine Peso (P
=),
Globe Telecom’s functional currency, and rounded to the nearest thousands except when
otherwise indicated.
On February 8, 2011, the Board of Directors (BOD) approved and authorized the release of the
consolidated financial statements of Globe Telecom, Inc. and Subsidiaries as of and for the
years ended December 31, 2010, 2009 and 2008.
2.2 Statement of Compliance
The consolidated financial statements of the Globe Group have been prepared in compliance
with Philippine Financial Reporting Standards (PFRS).
2.3 Basis of Consolidation
The accompanying consolidated financial statements include the accounts of Globe Telecom
and its subsidiaries as of and for the years ended December 31, 2010, 2009 and 2008. The
subsidiaries are as follows:
Name of Subsidiary
Innove
GXI
EGG Group
EGGC
Place of Incorporation
Principal Activity
Philippines
Wireless and wireline voice and data
communication services
Philippines
Software development for
telecommunications applications
and money remittance services
Philippines
EHL
Hong Kong
GTIC
Philippines
United States
GTI
Mobile content and application
development services
Mobile content and application
development services
Investment and holding company
No operations
Percentage of
Ownership
100%
100%
100%
100%
100%
100%
*SGVMC114676*
-3Subsidiaries are consolidated from the date on which control is transferred to the Globe Group
and cease to be consolidated from the date on which control is transferred out of the Globe
Group. The financial statements of the subsidiaries are prepared for the same reporting year
as Globe Telecom using uniform accounting policies for like transactions and other events in
similar circumstances. All significant intercompany balances and transactions, including
intercompany profits and losses, were eliminated during consolidation in accordance with the
accounting policy on consolidation.
2.4 Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous financial year except
for the adoption of the following new and amended PFRS and Philippine Interpretations of
International Financial Reporting Interpretations Committee (IFRIC) which became effective
on January 1, 2010. Except as otherwise indicated, the adoption of the new and amended
Standards and Interpretations did not have a significant impact on the consolidated financial
statements.
· Revised PFRS 3, Business Combinations and Philippine Accounting Standard (PAS) 27,
Consolidated and Separate Financial Statements
The revised PFRS 3 introduces a number of changes in the accounting for business
combinations that will impact the amount of goodwill recognized, the reported results in
the period that an acquisition occurs, and future reported results. The revised PAS 27
requires, among others, that (a) change in ownership interests of a subsidiary (that do not
result in loss of control) will be accounted for as an equity transaction and will have no
impact on goodwill nor will it give rise to a gain or loss; (b) losses incurred by the
subsidiary will be allocated between the controlling and non-controlling interests (NCI)
(previously referred to as ‘minority interests’), even if the losses exceed the non-controlling
equity investment in the subsidiary; and (c) on loss of control of a subsidiary, any retained
interest will be remeasured to fair value and this will impact the gain or loss recognized on
disposal.
· Philippine Interpretation IFRIC17, Distribution of Non-cash Assets to Owners
This Interpretation provides guidance on accounting for arrangements whereby an entity
distributes non-cash assets to shareholders either as a distribution of reserves or as
dividends.
· Amendment to PAS 39, Financial Instruments: Recognition and Measurement - Eligible
Hedged Items
This Amendment clarifies that an entity is permitted to designate a portion of the fair value
changes or cash flow variability of a financial instrument as a hedged item. This also
covers the designation of inflation as a hedged risk or portion in particular situations. The
Group has concluded that the amendment will have no impact on the financial position or
performance of the Group, as the Group has not entered into any such hedges.
· Amendments to PFRS 2, Share-based Payment: Group Cash-settled Transactions
This Amendment clarifies the scope and the accounting for group cash-settled share-based
payment transactions.
*SGVMC114676*
-4Improvements to PFRSs
The omnibus amendments to PFRSs issued in May 2008 and April 2009 were issued primarily
with a view to removing inconsistencies and clarifying wordings. There are separate
transitional provisions for each standard. The adoption of these amended standards did not
have any significant impact on the consolidated financial statements of the Globe Group,
unless otherwise indicated.
Issued in May 2008
· IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
This Amendment clarifies that when a subsidiary is classified as held for sale, all its assets
and liabilities are classified as held for sale, even when the entity remains a
non-controlling interest after the sale transaction. The Amendment is applied
prospectively.
Issued in April 2009
· PFRS 2, Share-based Payment
This Amendment clarifies that the contribution of a business on formation of a joint
venture and combinations under common control are not within the scope of PFRS 2 even
though they are out of scope of PFRS 3.
·
PFRS 5, Non-current Assets Held for Sale and Discontinued Operations
This Amendment clarifies that the disclosures required in respect of non-current assets and
disposal groups classified as held for sale or discontinued operations are only those set out
in PFRS 5. The disclosure requirements of other PFRSs only apply if specifically
required for such non-current assets or discontinued operations.
·
PFRS 8, Operating Segments
This Amendment clarifies that segment assets and liabilities need only be reported
when those assets and liabilities are included in measures that are used by the chief
operating decision maker.
·
PAS 1, Presentation of Financial Statements
This Amendment clarifies that the terms of a liability that could result, at anytime, in its
settlement by the issuance of equity instruments at the option of the counterparty do not
affect its classification.
·
PAS 7, Statement of Cash Flows
This Amendment explicitly states that only expenditure that results in a recognized asset
can be classified as a cash flow from investing activities.
·
PAS 17, Leases
This Amendment removes the specific guidance on classifying land as a lease. Prior to
the amendment, leases of land were classified as operating leases. This Amendment
requires that leases of land are classified as either ‘finance’ or ‘operating’ in accordance
with the general principles of PAS 17.
*SGVMC114676*
-5·
PAS 36, Impairment of Assets
This Amendment clarifies that the largest unit permitted for allocating goodwill, acquired
in a business combination, is the operating segment as defined in PFRS 8 before
aggregation for reporting purposes.
·
PAS 38, Intangible Assets
This Amendment clarifies that if an intangible asset acquired in a business combination is
identifiable only with another intangible asset, the acquirer may recognize the group of
intangible assets as a single asset provided the individual assets have similar useful lives.
It clarifies that the valuation techniques presented for determining the fair value of
intangible assets acquired in a business combination that are not traded in active markets
are only examples and are not restrictive on the methods that can be used.
·
PAS 39, Financial Instruments: Recognition and Measurement
This Amendment clarifies the following: 1) that a prepayment option is considered closely
related to the host contract when the exercise price of a prepayment option reimburses the
lender up to the approximate present value of lost interest for the remaining term of the
host contract; 2) that the scope exemption for contracts between an acquirer and a vendor
in a business combination to buy or sell an acquiree at a future date applies only to
binding forward contracts, and not derivative contracts where further actions by either
party are still to be taken and 3) that gains or losses on cash flow hedges of a forecast
transaction that subsequently results in the recognition of a financial instrument or on cash
flow hedges of recognized financial instruments should be reclassified in the period that
the hedged forecast cash flows affect profit or loss.
·
Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives
This Interpretation clarifies that it does not apply to possible reassessment, at the date of
acquisition, to embedded derivatives in contracts acquired in a combination between
entities or businesses under common control or the formation of a joint venture.
·
Philippine Interpretation IFRIC 16, Hedges of a Net Investment in a Foreign Operation
This Interpretation states that, in a hedge of a net investment in a foreign operation,
qualifying hedging instruments may be held by any entity or entities within the group,
including the foreign operation itself, as long as the designation, documentation and
effectiveness requirements of PAS 39 that relate to a net investment hedge are satisfied.
2.5 Future Changes in Accounting Policies
The Globe Group will adopt the following new and amended standards and interpretations
enumerated below when these become effective. Except as otherwise indicated, the Globe
Group does not expect the adoption of these new and amended PFRS and Philippine
Interpretations to have significant impact on the consolidated financial statements.
Effective 2011
· Amendment to PAS 24, Related Party Disclosures
This Amendment is effective for annual periods beginning on or after January 1, 2011.
It clarifies the definition of a related party to simplify the identification of such
relationships and to eliminate inconsistencies in its application. The revised standard
introduces a partial exemption of disclosure requirements for government-related entities.
Early adoption is permitted for either the partial exemption for government-related entities
or for the entire standard.
*SGVMC114676*
-6·
Amendment to PAS 32, Financial Instruments: Presentation - Classification of Rights
Issues
This Amendment is effective for annual periods beginning on or after February 1, 2010.
It amended the definition of a financial liability in order to classify rights issues (and
certain options or warrants) as equity instruments in cases where such rights are given pro
rata to all of the existing owners of the same class of an entity’s non-derivative equity
instruments, or to acquire a fixed number of the entity’s own equity instruments for a
fixed amount in any currency.
·
Amendments to Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding
Requirement
This Amendment is effective for annual periods beginning on or after January 1, 2011,
with retrospective application. It provides guidance on assessing the recoverable amount
of a net pension asset. The amendment permits an entity to treat the prepayment of a
minimum funding requirement as an asset.
·
Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity
Instruments
This Interpretation is effective for annual periods beginning on or after July 1, 2010.
It clarified that equity instruments issued to a creditor to extinguish a financial liability
qualify as consideration paid. The equity instruments issued are measured at their fair
value. In case that this cannot be reliably measured, the instruments are measured at the
fair value of the liability extinguished. Any gain or loss is recognized immediately in
profit or loss.
Improvements to PFRSs
The omnibus amendments to PFRSs issued in May 2010 were issued primarily with a
view to removing inconsistencies and clarifying wordings. There are separate transitional
provisions for each standard and will become effective January 1, 2011. Except
otherwise stated, the Globe Group does not expect the adoption of these new standards to
have significant impact on the consolidated financial statements.
· PFRS 3, Business Combinations (Revised)
This Amendment clarifies that the Amendments to PFRS 7, Financial Instruments:
Disclosures, PAS 32 and PAS 39 that eliminate the exemption for contingent
consideration, do not apply to contingent consideration that arose from business
combinations whose acquisition dates precede the application of PFRS 3 (as revised in
2008).
It also limits the scope of the measurement choices that only the components of NCI
that are present ownership interests that entitle their holders to a proportionate share of
the entity’s net assets, in the event of liquidation, shall be measured either: at fair
value or at the present ownership instruments’ proportionate share of the acquiree’s
identifiable net assets. Other components of NCI are measured at their acquisition
date fair value, unless another measurement basis is required by another PFRS.
*SGVMC114676*
-7The Amendment also requires an entity (in a business combination) to account for the
replacement of the acquiree’s share-based payment transactions (whether obliged or
voluntarily), i.e., split between consideration and post combination expenses.
However, if the entity replaces the acquiree’s awards that expire as a consequence of
the business combination, these are recognized as post-combination expenses. It
further specifies the accounting for share-based payment transactions that the acquirer
does not exchange for its own awards: if vested - they are part of NCI and measured at
their marked-based measure; if unvested - they are measured at market-based value as
if granted at acquisition date, and allocated between NCI and post-combination
expense.
· PFRS 7, Financial Instruments: Disclosures
This Amendment emphasizes the interaction between quantitative and qualitative
disclosures and the nature and extent of risks associated with financial instruments.
The amendments to quantitative and credit risk disclosures are as follows:
a) Clarify that only financial assets whose carrying amount does not reflect the
maximum exposure to credit risk need to provide further disclosure of the amount
that represents the maximum exposure to such risk.
b) Requires, for all financial assets, disclosure of the financial effect of collateral
held as security and other credit enhancements regarding the amount that best
represents the maximum exposure to credit risk (e.g., a description of the extent
to which collateral mitigates credit risk).
c) Remove disclosure of the collateral held as security, other credit enhancements
and an estimate of their fair value for financial assets that are past due but not
impaired, and financial assets that are individually determined to be impaired.
d) Remove the requirement to specifically disclose financial assets renegotiated to
avoid becoming past due or impaired.
e) Clarify that the additional disclosure required for financial assets obtained by
taking possession of collateral or other credit enhancements are only applicable to
assets still held at the reporting date.
· PAS 1, Presentation of Financial Statements
This Amendment clarifies that an entity will present an analysis of other
comprehensive income for each component of equity, either in the statement of
changes in equity or in the notes to the financial statements.
· PAS 27, Consolidated and Separate Financial Statements
This Amendment clarifies that the consequential amendments from PAS 27 made to
PAS 21, The Effect of Changes in Foreign Exchange Rates, PAS 28, Investments in
Associates and PAS 31, Interests in Joint Ventures, apply prospectively for annual
periods beginning on or after July 1, 2009 or earlier when PAS 27 is applied earlier.
· PAS 34, Interim Financial Reporting
This Amendment provides guidance to illustrate how to apply disclosure principles in
PAS 34 and add disclosure requirements around:
a) The circumstances likely to affect fair values of financial instruments and their
classification;
b) Transfers of financial instruments between different levels of the fair value
hierarchy;
*SGVMC114676*
-8c) Changes in classification of financial assets;
d) Changes in contingent liabilities and assets.
· Philippine Interpretation IFRIC 13, Customer Loyalty Programmes
This Amendment clarifies that when the fair value of award credits is measured based
on the value of the awards for which they could be redeemed, the amount of discounts
or incentives otherwise granted to customers not participating in the award credit
scheme, is to be taken into account.
Effective 2012
· Philippine Interpretation IFRIC 15, Agreement for the Construction of Real Estate
This Interpretation covers accounting for revenue and associated expenses by entities that
undertake the construction of real estate directly or through subcontractors which should
be applied retroactively and prospectively. It requires that revenue on construction of real
estate be recognized only upon completion, except when such contract qualifies as
construction contract to be accounted for under PAS 11, Construction Contracts, or
involves rendering of services in which case revenue is recognized based on stage of
completion. Contracts involving provision of services with the construction materials and
where the risks and reward of ownership are transferred to the buyer on a continuous basis
will also be accounted for based on stage of completion.
·
PAS 12, Income Taxes, Deferred Tax: Recovery of Underlying Assets
The Amendment to PAS 12 is effective for annual periods beginning on or after
January 1, 2012. It provides a practical solution to the problem of assessing whether
recovery of an asset will be through use or sale. It introduces a presumption that recovery
of the carrying amount of an asset will, normally, be through sale.
·
PFRS 7, Financial Instruments: Disclosures (Amendments) – Disclosures–Transfers of
Financial Assets
The Amendments to PFRS 7 are effective for annual periods beginning on or after
July 1, 2011. It will allow users of financial statements to improve their understanding of
transfer transactions of financial assets (for example, securitizations), including
understanding the possible effects of any risks that may remain with the entity that
transferred the assets. It also requires additional disclosures if a disproportionate amount
of transfer transactions are undertaken around the end of a reporting period.
Effective 2013
· PFRS 9, Financial Instruments: Classification and Measurement
The Standard, as issued in 2010, reflects the first phase of the work on the replacement of
PAS 39 and applies to classification and measurement of financial assets and financial
liabilities as defined in PAS 39. It is effective for annual periods beginning on or after
January 1, 2013. In subsequent phases, hedge accounting and derecognition will be
addressed. The completion of this project is expected in early 2011. The adoption of the
first phase of this Standard will have an effect on the classification and measurement of
the Globe Group’s financial assets. The Globe Group will quantify the effect in
conjunction with the other phases, when issued, to present a comprehensive picture.
*SGVMC114676*
-92.6 Significant Accounting Policies
2.6.1
Revenue Recognition
The Globe Group provides mobile and wireline voice, data communication and
broadband internet services which are both provided under postpaid and prepaid
arrangements.
The Globe Group assesses its revenue arrangements against specific criteria in order
to determine if it is acting as principal or agent. The following specific recognition
criteria must also be met before revenue is recognized.
Revenue is recognized when the delivery of the products or services has occurred and
collectability is reasonably assured.
Revenue is stated at amounts invoiced and accrued to customers, taking into
consideration the bill cycle cut-off (for postpaid subscribers), the amount charged
against preloaded airtime value (for prepaid subscribers), switch-monitored traffic (for
carriers and content providers) and excludes value-added tax (VAT) and overseas
communication tax. Inbound traffic charges, net of discounts and outbound traffic
charges, are accrued based on actual volume of traffic monitored by Globe Group’s
network and in the traffic settlement system.
2.6.1.1 Service Revenue
2.6.1.1.1
Subscribers
Revenues from subscribers principally consist of: (1) fixed
monthly service fees for postpaid wireless, wireline voice,
broadband internet, data subscribers and wireless prepaid
subscription fees for promotional offers; (2) usage of airtime and
toll fees for local, domestic and international long distance calls
in excess of consumable fixed monthly service fees, less
(a) bonus airtime and short messaging services (SMS) on free
Subscribers’ Identification Module (SIM), and (b) prepaid reload
discounts, (3) revenues from value-added services (VAS) such as
SMS in excess of consumable fixed monthly service fees (for
postpaid) and free SMS allocations (for prepaid), multimedia
messaging services (MMS), content and infotext services, net of
amounts settled with carriers owning the network where the
outgoing voice call or SMS terminates and payout to content
providers; (4) mobile data services, (5) inbound revenues from
other carriers which terminate their calls to the Globe Group’s
network less discounts; (6) revenues from international roaming
services; (7) usage of broadband and internet services in excess of
fixed monthly service fees; and (8) one-time service connection
fees (for wireline voice and data subscribers).
*SGVMC114676*
- 10 Postpaid service arrangements include fixed monthly service fees,
which are recognized over the subscription period on a pro-rata
basis. Monthly service fees billed in advance are initially
deferred and recognized as revenues during the period when
earned. Telecommunications services provided to postpaid
subscribers are billed throughout the month according to the bill
cycles of subscribers. As a result of bill cycle cut-off, monthly
service revenues earned but not yet billed at the end of the month
are estimated and accrued. These estimates are based on actual
usage less estimated consumable usage using historical ratio of
consumable usage over billable usage.
Proceeds from over-the-air reloading channels and the sale of
prepaid cards are deferred and shown as “Unearned revenues” in
the consolidated statements of financial position. Revenue is
recognized upon actual usage of airtime value net of discounts on
promotional calls and net of free airtime value or SMS and bonus
reloads. Unused load value is recognized as revenue upon
expiration.
The Globe Group offers loyalty programs which allow its
subscribers to accumulate points when they purchase services
from the Globe Group. The points can then be redeemed for free
services, discounts and raffle coupons, subject to a minimum
number of points being obtained. The consideration received or
receivable is allocated between the sale of services and award
credits. The portion of the consideration allocated to the award
credits is accounted for as unearned revenues. This will be
recognized as revenue upon the award redemption.
2.6.1.1.2
Traffic
Inbound revenues refer to traffic originating from other
telecommunications providers terminating to the Globe Group’s
network, while outbound charges represent traffic sent out or
mobile content delivered using agreed termination rates and/or
revenue sharing with other foreign and local carriers and content
providers. Adjustments are made to the accrued amount for
discrepancies between the traffic volume per Globe Group’s
records and per records of the other carriers as these are
determined and/or mutually agreed upon by the parties.
Uncollected inbound revenues are shown as traffic settlements
receivable under the “Receivables” account, while unpaid
outbound charges are shown as traffic settlements
payable under the “Accounts payable and accrued expenses”
account in the consolidated statements of financial position unless
a legal right of offset exists.
*SGVMC114676*
- 11 2.6.1.2 Nonservice revenues
Proceeds from sale of handsets, phonekits, SIM packs, modems and
accessories are recognized upon delivery of the item. The related cost or net
realizable value of handsets, phonekits, SIM packs, modems and accessories
sold to customers are presented as “Cost of sales” in the consolidated
statements of comprehensive income.
2.6.1.3 Others
Interest income is recognized as it accrues using the effective interest rate
method.
Lease income from operating lease is recognized on a straight-line basis over
the lease term.
Dividend income is recognized when the Globe Group’s right to receive
payment is established.
2.6.2
Subscriber Acquisition and Retention Costs
The related costs incurred in connection with the acquisition of subscribers are
charged against current operations. Subscriber acquisition costs primarily include
commissions, handset, phonekit and device subsidies and selling expenses. Subsidies
represent the difference between the cost of handsets, phonekits, SIM cards, modems
and accessories (included in the “Cost of sales” and “Impairment losses and others”
account), and the price offered to the subscribers (included in the “Nonservice
revenues” account). Retention costs for existing postpaid subscribers are in the form
of free handsets, devices and bill credits. Retention costs are charged against current
operations and included under the “General, selling and administrative expenses”
account in the consolidated statements of comprehensive income upon delivery or
when there is a contractual obligation to deliver. Bill credits are deducted from
service revenues upon application against qualifying subscriber bills.
2.6.3
Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of cash with original
maturities of three months or less from date of placement and that are subject to an
insignificant risk of change in value.
2.6.4
Financial Instruments
2.6.4.1 General
2.6.4.1.1
Initial recognition and fair value measurement
Financial instruments are recognized in the Globe Group’s
consolidated statements of financial position when the Globe
Group becomes a party to the contractual provisions of the
instrument. Purchases or sales of financial assets that require
delivery of assets within the time frame established by regulation
or convention in the marketplace are recognized (regular way
trades) on the trade date, i.e., the date that the Globe Group
commits to purchase or sell the asset.
*SGVMC114676*
- 12 Financial instruments are recognized initially at fair value.
Except for financial instruments at fair value through profit or
loss (FVPL), the initial measurement of financial assets includes
directly attributable transaction costs.
The Globe Group classifies its financial assets into the following
categories: financial assets at FVPL, held-to-maturity (HTM)
investments, AFS investments, and loans and receivables. The
Globe Group classifies its financial liabilities into financial
liabilities at FVPL and other financial liabilities. The
classification depends on the purpose for which the investments
were acquired and whether they are quoted in an active market.
Management determines the classification of its investments at
initial recognition and, where allowed and appropriate, reevaluates such designation every reporting date.
The fair value for financial instruments traded in active markets at
the end of reporting date is based on their quoted market price or
dealer price quotations (bid price for long positions and ask price
for short positions), without any deduction for transaction costs.
When current bid and ask prices are not available, the price of the
most recent transaction provides evidence of the current fair value
as long as there has not been a significant change in economic
circumstances since the time of the transaction.
For all other financial instruments not listed in an active market,
the fair value is determined by using appropriate valuation
techniques. Valuation techniques include net present value
techniques, comparison to similar instruments for which market
observable prices exist, option pricing models, and other relevant
valuation models. Any difference noted between the fair value
and the transaction price is treated as expense or income, unless it
qualifies for recognition as some type of asset or liability.
Where the transaction price in a non-active market is different
from the fair value of other observable current market
transactions in the same instrument or based on a valuation
technique whose variables include only data from observable
market, the Globe Group recognizes the difference between the
transaction price and fair value (a “Day 1” profit) in profit or loss.
In cases where no observable data is used, the difference between
the transaction price and model value is only recognized in profit
or loss when the inputs become observable or when the
instrument is derecognized. For each transaction, the Globe
Group determines the appropriate method of recognizing the
“Day 1” profit amount.
*SGVMC114676*
- 13 2.6.4.1.2
Financial Assets or Financial Liabilities at FVPL
This category consists of financial assets or financial liabilities
that are held for trading or designated by management as FVPL
on initial recognition. Derivative instruments, except those
designated as hedging instruments in hedge relationships as
defined by PAS 39, are classified under this category.
Derivatives, including separated embedded derivatives, are also
classified as held for trading unless they are designated as
effective hedging instruments.
Financial assets or financial liabilities at FVPL are recorded in the
consolidated statements of financial position at fair value, with
changes in fair value being recorded in profit and loss. Interest
earned or incurred is recorded as “Interest income or expense”,
respectively, while dividend income is recorded when the right of
payment has been established. Both are recorded in profit and
loss.
Financial assets or financial liabilities are classified in this
category as designated by management on initial recognition
when any of the following criteria are met:
2.6.4.1.3
·
the designation eliminates or significantly reduces the
inconsistent treatment that would otherwise arise from
measuring the assets or liabilities or recognizing gains or
losses on a different basis; or
·
the assets and liabilities are part of a group of financial assets,
financial liabilities or both which are managed and their
performance are evaluated on a fair value basis in accordance
with a documented risk management or investment strategy;
or
·
the financial instrument contains an embedded derivative,
unless the embedded derivative does not significantly modify
the cash flows or it is clear, with little or no analysis, that it
would not be separately recorded.
HTM investments
HTM investments are quoted non-derivative financial assets with
fixed or determinable payments and fixed maturities for which
the Globe Group’s management has the positive intention and
ability to hold to maturity. Where the Globe Group sells other
than an insignificant amount of HTM investments, the entire
category would be tainted and reclassified as AFS investments.
After initial measurement, HTM investments are subsequently
measured at amortized cost using the effective interest rate
method, less any impairment losses. Amortized cost is calculated
by taking into account any discount or premium on acquisition
*SGVMC114676*
- 14 and fees that are an integral part of the effective interest rate.
Gains and losses are recognized in profit or loss when the HTM
investments are derecognized and impaired, as well as through
the amortization process. The amortization is included in
“Interest income” in the consolidated statements of
comprehensive income. The effects of restatement of foreign
currency-denominated HTM investments are recognized in profit
or loss.
There are no outstanding HTM investments as of December 31,
2010, 2009 and 2008.
2.6.4.1.4
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are not entered into with the intention of immediate
or short-term resale and are not classified as financial assets held
for trading, designated as AFS investments or designated at
FVPL.
This accounting policy relates to the consolidated statements of
financial position caption “Receivables”, which arise primarily
from subscriber and traffic revenues and other types of
receivables, “Short-term investments”, which arise primarily from
unquoted debt securities, and other nontrade receivables included
under “Prepayments and other current assets” and loans
receivables included under “Other noncurrent assets”.
Receivables are recognized initially at fair value, which normally
pertains to the billable amount. After initial measurement,
receivables are subsequently measured at amortized cost using the
effective interest rate method, less any allowance for impairment
losses. Amortized cost is calculated by taking into account any
discount or premium on the issue and fees that are an integral part
of the effective interest rate. Penalties, termination fees and
surcharges on past due accounts of postpaid subscribers are
recognized as revenues upon collection. The losses arising from
impairment of receivables are recognized in the “Impairment
losses and others” account in the consolidated statements of
comprehensive income. The level of allowance for impairment
losses is evaluated by management on the basis of factors that
affect the collectability of accounts (see accounting policy on
2.6.4.2 Impairment of Financial Assets).
Short-term investments, other nontrade receivables and loans
receivable are recognized initially at fair value, which normally
pertains to the consideration paid. Similar to receivables,
subsequent to initial recognition, short-term investments, other
nontrade receivables and loans receivables are measured at
amortized cost using the effective interest rate method, less any
allowance for impairment losses.
*SGVMC114676*
- 15 2.6.4.1.5
AFS investments
AFS investments are those investments which are designated as
such or do not qualify to be classified as designated as at FVPL,
HTM investments or loans and receivables. They are purchased
and held indefinitely, and may be sold in response to liquidity
requirements or changes in market conditions. They include
equity investments, money market papers and other debt
instruments.
After initial measurement, AFS investments are subsequently
measured at fair value. Interest earned on holding AFS
investments are reported as interest income using the effective
interest rate. The unrealized gains and losses arising from the fair
valuation of AFS investments are excluded from reported
earnings and are reported as “Other reserves” (net of tax where
applicable) in the equity section of the consolidated statements of
financial position. When the investment is disposed of, the
cumulative gains or losses previously recognized in equity is
recognized in profit or loss.
When the fair value of AFS investments cannot be measured
reliably because of lack of reliable estimates of future cash flows
and discount rates necessary to calculate the fair value of
unquoted equity instruments, these investments are carried at
cost, less any allowance for impairment losses. Dividends earned
on holding AFS investments are recognized in profit or loss when
the right of payment has been established.
The Globe Group evaluates its AFS investments whether the
ability and intention to sell them in the near term is still
appropriate. When the Globe Group is unable to trade the AFS
investments due to inactive markets and management intent
significantly changes to do so in the foreseeable future, the Globe
Group may elect to reclassify it to HTM investment or loans and
receivables provided they meet certain criteria set by PAS 39 in
rare circumstances.
The losses arising from impairment of such investments are
recognized as “Impairment losses and others” in the consolidated
statements of comprehensive income.
2.6.4.1.6
Other financial liabilities
Issued financial instruments or their components, which are not
designated at FVPL are classified as other financial liabilities
where the substance of the contractual arrangement results in the
Globe Group having an obligation either to deliver cash or
another financial asset to the holder, or to satisfy the obligation
other than by the exchange of a fixed amount of cash or another
financial asset for a fixed number of own equity shares. The
components of issued financial instruments that contain both
liability and equity elements are accounted for separately, with
*SGVMC114676*
- 16 the equity component being assigned the residual amount after
deducting from the instrument as a whole the amount separately
determined as the fair value of the liability component on the date
of issue. After initial measurement, other financial liabilities are
subsequently measured at amortized cost using the effective
interest rate method. Amortized cost is calculated by taking into
account any discount or premium on the issue and fees that are an
integral part of the effective interest rate. Any effects of
restatement of foreign currency-denominated liabilities are
recognized in profit or loss.
This accounting policy applies primarily to the Globe Group’s
debt, accounts payable and other obligations that meet the above
definition (other than liabilities covered by other accounting
standards, such as income tax payable).
2.6.4.1.7
Derivative Instruments
2.6.4.1.7.1 General
The Globe Group enters into short-term deliverable
and nondeliverable currency forward contracts to
manage its currency exchange exposure related to
short-term foreign currency-denominated monetary
assets and liabilities and foreign currency linked
revenues.
The Globe Group also enters into long-term currency
and interest rate swap contracts to manage its foreign
currency and interest rate exposures arising from its
long-term loan. Such swap contracts are sometimes
entered into in combination with options.
2.6.4.1.7.2 Recognition and measurement
Derivative financial instruments are initially
recognized at fair value on the date on which a
derivative contract is entered into and are
subsequently remeasured at fair value. Derivatives
are carried as financial assets when the fair value is
positive and as financial liabilities when the fair
value is negative. The method of recognizing the
resulting gain or loss depends on whether the
derivative is designated as a hedge of an identified
risk and qualifies for hedge accounting treatment.
The objective of hedge accounting is to match the
impact of the hedged item and the hedging
instrument in profit or loss. To qualify for hedge
accounting, the hedging relationship must comply
with strict requirements such as the designation of the
derivative as a hedge of an identified risk exposure,
hedge documentation, probability of occurrence of
*SGVMC114676*
- 17 the forecasted transaction in a cash flow hedge,
assessment (both prospective and retrospective bases)
and measurement of hedge effectiveness, and
reliability of the measurement bases of the derivative
instruments.
Upon inception of the hedge, the Globe Group
documents the relationship between the hedging
instrument and the hedged item, its risk management
objective and strategy for undertaking various hedge
transactions, and the details of the hedging
instrument and the hedged item. The Globe Group
also documents its hedge effectiveness assessment
methodology, both at the hedge inception and on an
ongoing basis, as to whether the derivatives that are
used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of
hedged items.
Hedge effectiveness is likewise measured, with any
ineffectiveness being reported immediately in profit
or loss.
2.6.4.1.7.3 Types of Hedges
The Globe Group designates derivatives which
qualify as accounting hedges as either: (a) a hedge of
the fair value of a recognized fixed rate asset, liability
or unrecognized firm commitment (fair value hedge);
or (b) a hedge of the cash flow variability of
recognized floating rate asset and liability or
forecasted sales transaction (cash flow hedge).
Fair Value Hedges
Fair value hedges are hedges of the exposure to
variability in the fair value of recognized assets,
liabilities or unrecognized firm commitments. The
gain or loss on a derivative instrument designated and
qualifying as a fair value hedge, as well as the
offsetting loss or gain on the hedged item attributable
to the hedged risk, are recognized in profit or loss in
the same accounting period. Hedge effectiveness is
determined based on the hedge ratio of the fair value
changes of the hedging instrument and the underlying
hedged item. When the hedge ceases to be highly
effective, hedge accounting is discontinued.
As of December 31, 2010, 2009 and 2008, there were
no derivatives designated and accounted for as fair
value hedges.
*SGVMC114676*
- 18 Cash Flow Hedges
The Globe Group designates as cash flow hedges the
following derivatives: (a) interest rate swaps as cash
flow hedge of the interest rate risk of a floating rate
obligation and (b) certain foreign exchange forward
contracts as cash flow hedge of expected United
States Dollar (USD) revenues.
A cash flow hedge is a hedge of the exposure to
variability in future cash flows related to a
recognized asset, liability or a forecasted sales
transaction. Changes in the fair value of a hedging
instrument that qualifies as a highly effective cash
flow hedge are recognized in “Other reserves,” which
is a component of equity. Any hedge ineffectiveness
is immediately recognized in profit or loss.
If the hedged cash flow results in the recognition of a
nonfinancial asset or liability, gains and losses
previously recognized directly in equity are
transferred from equity and included in the initial
measurement of the cost or carrying value of the asset
or liability. Otherwise, for all other cash flow
hedges, gains and losses initially recognized in equity
are transferred from equity to profit or loss in the
same period or periods during which the hedged
forecasted transaction or recognized asset or liability
affect earnings.
Hedge accounting is discontinued prospectively when
the hedge ceases to be highly effective. When hedge
accounting is discontinued, the cumulative gains or
losses on the hedging instrument that has been
reported in “Other reserves” is retained in other
comprehensive income until the hedged transaction
impacts profit or loss. When the forecasted
transaction is no longer expected to occur, any net
cumulative gains or losses previously reported in
“Other reserves” is recognized immediately in profit
or loss.
The effective portion of the hedge transaction coming
from the fair value changes of the currency forwards
are subsequently recycled from equity to profit or
loss and is presented as part of the US dollar-based
revenues.
*SGVMC114676*
- 19 2.6.4.1.7.4 Other Derivative Instruments Not Accounted for as
Accounting Hedges
Certain freestanding derivative instruments that
provide economic hedges under the Globe Group’s
policies either do not qualify for hedge accounting or
are not designated as accounting hedges. Changes in
the fair values of derivative instruments not
designated as hedges are recognized immediately in
profit or loss. For bifurcated embedded derivatives in
financial and nonfinancial contracts that are not
designated or do not qualify as hedges, changes in the
fair values of such transactions are recognized in
profit or loss.
2.6.4.1.8
Offsetting
Financial assets and financial liabilities are offset and the net
amount is reported in the consolidated statements of financial
position if, and only if, there is a currently enforceable legal
right to offset the recognized amounts and there is an
intention to settle on a net basis, or to realize the asset and
settle the liability simultaneously. This is not generally the
case with master netting agreements; thus, the related assets
and liabilities are presented gross in the consolidated
statements of financial position.
2.6.4.2 Impairment of Financial Assets
The Globe Group assesses at end of the reporting date whether a financial
asset or group of financial assets is impaired.
2.6.4.2.1
Assets carried at amortized cost
If there is objective evidence that an impairment loss on
financial assets carried at amortized cost (e.g. receivables)
has been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the
present value of estimated future cash flows discounted at the
asset’s original effective interest rate. Time value is
generally not considered when the effect of discounting is not
material. The carrying amount of the asset is reduced through
the use of an allowance account. The amount of the loss shall
be recognized in profit or loss.
The Globe Group first assesses whether objective evidence of
impairment exists individually for financial assets that are
individually significant, and individually or collectively for
financial assets that are not individually significant. If it is
determined that no objective evidence of impairment exists
for an individually assessed financial asset, whether
significant or not, the asset is included in a group of financial
assets with similar credit risk characteristics and that group of
financial assets are collectively assessed for impairment.
*SGVMC114676*
- 20 Assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognized are
not included in a collective assessment of impairment.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an
event occurring after the impairment was recognized, the
previously recognized impairment loss is reversed. Any
subsequent reversal of an impairment loss is recognized in
profit or loss to the extent that the carrying value of the asset
does not exceed what should have been its amortized cost at
the reversal date.
With respect to receivables, the Globe Group performs a
regular review of the age and status of these accounts,
designed to identify accounts with objective evidence of
impairment and provide the appropriate allowance for
impairment losses. The review is accomplished using a
combination of specific and collective assessment
approaches, with the impairment losses being determined for
each risk grouping identified by the Globe Group.
2.6.4.2.1.1 Subscribers
Full allowance for impairment losses is provided
for receivables from permanently disconnected
wireless and wireline subscribers. Permanent
disconnections are made after a series of
collection steps following nonpayment by
postpaid subscribers. Such permanent
disconnections generally occur within a
predetermined period from billing date.
The allowance for impairment loss on wireless
subscriber accounts is determined based on the
results of the net flow to write-off methodology.
Net flow tables are derived from account-level
monitoring of subscriber accounts between
different age brackets, from current to 1 day past
due to 210 days past due. The net flow to writeoff methodology relies on the historical data of
net flow tables to establish a percentage (“net
flow rate”) of subscriber receivables that are
current or in any state of delinquency as of
reporting date that will eventually result in writeoff. The allowance for impairment losses is then
computed based on the outstanding balances of
the receivables at the end of reporting date and
the net flow rates determined for the current and
each delinquency bracket.
*SGVMC114676*
- 21 For active residential and business wireline voice
subscribers, full allowance is generally provided
for outstanding receivables that are past due by
90 and 150 days, respectively. Full allowance is
likewise provided for receivables from wireline
data corporate accounts that are past due by 150
days.
Regardless of the age of the account, additional
impairment losses are also made for wireless and
wireline accounts specifically identified to be
doubtful of collection when there is information
on financial incapacity after considering the other
contractual obligations between the Globe Group
and the subscriber.
2.6.4.2.1.2 Traffic
For traffic receivables, impairment losses are
made for accounts specifically identified to be
doubtful of collection regardless of the age of the
account. For receivable balances that appear
doubtful of collection, allowance is provided
after review of the status of settlement with each
carrier and roaming partner, taking into
consideration normal payment cycles, recovery
experience and credit history of the parties.
2.6.4.2.1.3 Other receivables
Other receivables from dealers, credit card
companies and other parties are provided with
allowance for impairment losses if specifically
identified to be doubtful of collection regardless
of the age of the account.
2.6.4.2.2
AFS investments carried at cost
If there is objective evidence that an impairment loss has
been incurred on an unquoted equity instrument that is not
carried at fair value because its fair value cannot be reliably
measured, or on a derivative asset that is linked to and must
be settled by delivery of such unquoted equity instrument, the
amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated
future cash flows discounted at the current market rate of
return for a similar financial asset. The carrying amount of
the asset is reduced through the use of an allowance account.
*SGVMC114676*
- 22 2.6.4.2.3
AFS investments carried at fair value
If an AFS investment carried at fair value is impaired, an
amount comprising the difference between its cost (net of any
principal repayment and amortization) and its current fair
value, less any impairment loss previously recognized in
profit or loss, is transferred from equity to profit or loss.
Reversals of impairment losses in respect of equity
instruments classified as AFS are not recognized in profit or
loss. Reversals of impairment losses on debt instruments are
made through profit or loss if the increase in fair value of the
instrument can be objectively related to an event occurring
after the impairment loss was recognized in profit or loss.
2.6.4.3 Derecognition of Financial Instruments
2.6.4.3.1
Financial Asset
A financial asset (or, where applicable a part of a financial
asset or part of a group of financial assets) is derecognized
where:
·
the rights to receive cash flows from the asset have
expired;
·
the Globe Group retains the right to receive cash flows
from the asset, but has assumed an obligation to pay them
in full without material delay to a third party under a
“pass-through” arrangement; or
·
the Globe Group has transferred its rights to receive cash
flows from the asset and either (a) has transferred
substantially all the risks and rewards of ownership or (b)
has neither transferred nor retained the risk and rewards
of the asset but has transferred the control of the asset.
Where the Globe Group has transferred its rights to receive
cash flows from an asset and has neither transferred nor
retained substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognized to the
extent of the Globe Group’s continuing involvement in the
asset.
2.6.4.3.2
Financial Liability
A financial liability is derecognized when the obligation
under the liability is discharged or cancelled or has expired.
Where an existing financial liability is replaced by another
from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such
an exchange or modification is treated as a derecognition of
the original liability and the recognition of a new liability,
and the difference in the respective carrying amounts is
recognized in profit or loss.
*SGVMC114676*
- 23 2.6.5
Inventories and Supplies
Inventories and supplies are stated at the lower of cost or net realizable value (NRV).
NRV for handsets, modems and accessories is the selling price in the ordinary course
of business less direct costs to sell, while NRV for SIM packs, call cards, spare parts
and supplies consists of the related replacement costs. In determining the NRV, the
Globe Group considers any adjustment necessary for obsolescence, which is generally
provided 100% for nonmoving items after a certain period. Cost is determined using
the moving average method.
2.6.6
Non-current assets held for sale
Non-current assets classified as held for sale are measured at the lower of carrying
amount and fair value less cost to sell. Non-current assets are classified as held for
sale if their carrying amounts will be recovered through a sale transaction rather than
through continuing use. This condition is regarded as met only when the sale is
highly probable and the asset is available for immediate sale in its present condition.
The Globe Group is committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of classification.
Property and equipment and intangible assets once classified as held for sale are not
depreciated/amortized.
2.6.7
Property and Equipment
Property and equipment, except land, are carried at cost less accumulated
depreciation, amortization and impairment losses. Land is stated at cost less any
impairment losses.
The initial cost of an item of property and equipment includes its purchase price and
any cost attributable in bringing the property and equipment to its intended location
and working condition. Cost also includes: (a) interest and other financing charges on
borrowed funds used to finance the acquisition of property and equipment to the
extent incurred during the period of installation and construction; and (b) asset
retirement obligations (ARO) specifically on property and equipment
installed/constructed on leased properties.
Subsequent costs are capitalized as part of property and equipment only when it is
probable that future economic benefits associated with the item will flow to the Globe
Group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged against current operations as incurred.
Assets under construction (AUC) are carried at cost and transferred to the related
property and equipment account when the construction or installation and related
activities necessary to prepare the property and equipment for their intended use are
complete, and the property and equipment are ready for service.
Depreciation and amortization of property and equipment commences once the
property and equipment are available for use and computed using the straight-line
method over the estimated useful lives (EUL) of the property and equipment.
Leasehold improvements are amortized over the shorter of their EUL or the
corresponding lease terms.
*SGVMC114676*
- 24 The EUL of property and equipment are reviewed annually based on expected asset
utilization as anchored on business plans and strategies that also consider expected
future technological developments and market behavior to ensure that the period of
depreciation and amortization is consistent with the expected pattern of economic
benefits from items of property and equipment.
When property and equipment is retired or otherwise disposed of, the cost and the
related accumulated depreciation, amortization and impairment losses are removed
from the accounts and any resulting gain or loss is credited to or charged against
current operations.
2.6.8
ARO
The Globe Group is legally required under various contracts to restore leased property
to its original condition and to bear the cost of dismantling and deinstallation at the
end of the contract period. The Globe Group recognizes the present value of these
obligations and capitalizes these costs as part of the balances of the related property
and equipment accounts, which are depreciated on a straight-line basis over the useful
life of the related property and equipment or the contract period, whichever is shorter.
The amount of ARO is accrued and such accretion is recognized as interest expense.
2.6.9
Investment Property
Investment property is initially measured at cost, including transaction costs.
Subsequent to initial recognition, investment property is carried at cost less
accumulated depreciation and any impairment losses.
Expenditures incurred after the investment property has been put in operation, such as
repairs and maintenance costs, are normally charged against income in the period in
which the costs are incurred.
Depreciation of investment property is computed using the straight-line method over
its useful life, regardless of utilization. The EUL and the depreciation method are
reviewed periodically to ensure that the period and method of depreciation are
consistent with the expected pattern of economic benefits from items of investment
properties.
Transfers are made to investment property, when, and only when, there is a change in
use, evidenced by the end of the owner occupation, commencement of an operating
lease to another party or completion of construction or development. Transfers are
made from investment property when, and only when, there is a change in use,
evidenced by the commencement of owner occupation or commencement of
development with the intention to sell.
Investment property is derecognized when it has either been disposed of or
permanently withdrawn from use and no future benefit is expected from its disposal.
Any gain or loss on derecognition of an investment property is recognized in profit or
loss in the period of derecognition.
*SGVMC114676*
- 25 2.6.10 Intangible Assets
Intangible assets consist of 1) costs incurred to acquire application software (not an
integral part of its related hardware or equipment) and telecommunications equipment
software licenses; and 2) intangible assets identified to exist during the acquisition of
EGG Group for its existing customer contracts. Costs directly associated with the
development of identifiable software that generate expected future benefits to the
Globe Group are recognized as intangible assets. All other costs of developing and
maintaining software programs are recognized as expense when incurred.
Subsequent to initial recognition, intangible assets are measured at cost less
accumulated amortization and any impairment losses. The EUL of intangible assets
with finite lives are assessed at the individual asset level. Intangible assets with finite
lives are amortized on a straight-line basis over their useful lives. The periods and
method of amortization for intangible assets with finite useful lives are reviewed
annually or more frequently when an indicator of impairment exists.
A gain or loss arising from derecognition of an intangible asset is measured as the
difference between the net disposal proceeds and the carrying amount of the asset and
is recognized in the consolidated statements of comprehensive income when the asset
is derecognized.
2.6.11 Business Combinations and Goodwill
Business combinations are accounted for using the purchase method. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets (including previously unrecognized
intangible assets) acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at fair values at the date of acquisition,
irrespective of the extent of any minority interest.
Goodwill is initially measured at cost being the excess of the cost of the business
combination over the Group’s share in the net fair value of the acquiree’s identifiable
assets, liabilities and contingent liabilities. If the cost of the acquisition is less than
the fair value of the net assets of the subsidiary acquired, the difference is recognized
directly in the consolidated statements of comprehensive income.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of the impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to each of the Group’s
cash-generating units (CGU) that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units.
Goodwill allocated to a cash-generating unit is included in the carrying amount of the
CGU being disposed when determining the gain or loss on disposal. For partial
disposal of operation within the CGU, the goodwill associated with the disposed
operation is included in the carrying amount of the operation when determining gain
or loss on disposal and measured on the basis of the relative values of the operation
disposed of and the portion of the CGU retained, unless another method better reflects
the goodwill associated with the operation disposed of.
*SGVMC114676*
- 26 2.6.12 Investments in Joint Ventures
Investments in joint ventures (JV) are accounted for under the equity method, less any
impairment losses. A JV is an entity, not being a subsidiary nor an associate, in which
the Globe Group exercises joint control together with one or more venturers.
Under the equity method, the investments in JV are carried in the consolidated
statements of financial position at cost plus post-acquisition changes in the Globe
Group’s share in net assets of the JV, less any allowance for impairment losses. The
profit or loss includes Globe Group’s share in the results of operations of its JV.
Where there has been a change recognized directly in the JV’s equity, the Globe
Group recognizes its share of any changes and discloses this, when applicable, in
other comprehensive income.
2.6.13 Impairment of Nonfinancial Assets
For assets excluding goodwill, an assessment is made at the end of the reporting date
to determine whether there is any indication that an asset may be impaired, or whether
there is any indication that an impairment loss previously recognized for an asset in
prior periods may no longer exist or may have decreased. If any such indication exists
and when the carrying value of an asset exceeds its estimated recoverable amount, the
asset or CGU to which the asset belongs is written down to its recoverable amount.
The recoverable amount of an asset is the greater of its net selling price and value in
use. Recoverable amounts are estimated for individual assets or investments or, if it is
not possible, for the CGU to which the asset belongs. For impairment loss on specific
assets or investments, the recoverable amount represents the net selling price.
In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
An impairment loss is recognized only if the carrying amount of an asset exceeds its
recoverable amount. An impairment loss is charged against operations in the year in
which it arises. A previously recognized impairment loss is reversed only if there has
been a change in estimate used to determine the recoverable amount of an asset,
however, not to an amount higher than the carrying amount that would have been
determined (net of any accumulated depreciation and amortization for property and
equipment, investment property and intangible assets) had no impairment loss been
recognized for the asset in prior years. A reversal of an impairment loss is credited to
current operations.
For assessing impairment of goodwill, a test for impairment is performed annually and
when circumstances indicate that the carrying value may be impaired. Impairment is
determined for goodwill by assessing the recoverable amount of each CGU (or group
of CGUs) to which the goodwill relates. Where the recoverable amount of the CGU is
less than their carrying amount an impairment loss is recognized. Impairment losses
relating to goodwill cannot be reversed in future periods.
*SGVMC114676*
- 27 2.6.14 Income Tax
2.6.14.1
Current Tax
Current tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the tax
authority. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted as at the end of the
reporting period.
2.6.14.2
Deferred Income Tax
Deferred income tax is provided using the liability method on all
temporary differences, with certain exceptions, at the end of the reporting
period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary
differences, with certain exceptions. Deferred income tax assets are
recognized for all deductible temporary differences, with certain
exceptions, and carryforward benefits of unused tax credits from excess
minimum corporate income tax (MCIT) over regular corporate income
tax and net operating loss carryover (NOLCO) to the extent that it is
probable that taxable income will be available against which the
deductible temporary differences and the carryforward benefits of unused
MCIT and NOLCO can be used.
Deferred income tax is not recognized when it arises from the initial
recognition of an asset or liability in a transaction that is not a business
combination and, at the time of transaction, affects neither the accounting
income nor taxable income or loss. Deferred income tax liabilities are not
provided on nontaxable temporary differences associated with
investments in JV.
Deferred income tax relating to items recognized directly in equity or
other comprehensive income is included in the related equity or other
comprehensive income account and not in profit or loss.
The carrying amounts of deferred income tax assets are reviewed every
end of reporting period and reduced to the extent that it is no longer
probable that sufficient taxable income will be available to allow all or
part of the deferred income tax assets to be utilized.
Deferred income tax assets and liabilities are offset, if a legally
enforceable right exists to set off current income tax assets against current
income tax liabilities and the deferred income taxes relate to the same
taxable entity and the same taxation authority.
Deferred income tax assets and liabilities are measured at the tax rates
that are expected to apply in the year when the assets are realized or the
liabilities are settled based on tax rates (and tax laws) that have been
enacted or substantively enacted as at the end of the reporting period.
*SGVMC114676*
- 28 Movements in the deferred income tax assets and liabilities arising from
changes in tax rates are charged or credited to income for the period.
2.6.15 Provisions
Provisions are recognized when: (a) the Globe Group has present obligation (legal or
constructive) as a result of a past event; (b) it is probable (i.e., more likely than not)
that an outflow of resources embodying economic benefits will be required to settle
the obligation; and (c) a reliable estimate can be made of the amount of the obligation.
Provisions are reviewed every end of the reporting period and adjusted to reflect the
current best estimate. If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessment of the time value of money and, where appropriate,
the risks specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognized as interest expense under
“Financing costs” in consolidated statements of comprehensive income.
2.6.16 Share-based Payment Transactions
Certain employees (including directors) of the Globe Group receive remuneration in
the form of share-based payment transactions, whereby employees render services in
exchange for shares or rights over shares (“equity-settled transactions”) (see Note 18).
The cost of equity-settled transactions with employees is measured by reference to the
fair value at the date at which they are granted. In valuing equity-settled transactions,
vesting conditions, including performance conditions, other than market conditions
(conditions linked to share prices), shall not be taken into account when estimating the
fair value of the shares or share options at the measurement date. Instead, vesting
conditions are taken into account in estimating the number of equity instruments that
will vest.
The cost of equity-settled transactions is recognized in profit or loss, together with a
corresponding increase in equity, over the period in which the service conditions are
fulfilled, ending on the date on which the relevant employees become fully entitled to
the award (‘vesting date’). The cumulative expense recognized for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the number of awards that, in the opinion of the
management of the Globe Group at that date, based on the best available estimate of
the number of equity instruments, will ultimately vest.
No expense is recognized for awards that do not ultimately vest, except for awards
where vesting is conditional upon a market condition, which are treated as vesting
irrespective of whether or not the market condition is satisfied, provided that all other
performance conditions are satisfied.
Where the terms of an equity-settled award are modified, as a minimum, an expense is
recognized as if the terms had not been modified. In addition, an expense is
recognized for any increase in the value of the transaction as a result of the
modification, measured at the date of modification.
*SGVMC114676*
- 29 Where an equity-settled award is cancelled, it is treated as if it had vested on the date
of cancellation, and any expense not yet recognized for the award is recognized
immediately. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled and new
awards are treated as if they were a modification of the original award, as described in
the previous paragraph. The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of earnings per share (EPS) (see Note 27).
2.6.17 Treasury Stock
Treasury stock is recorded at cost and is presented as a deduction from equity. When
the shares are retired, the capital stock account is reduced by its par value and the
excess of cost over par value upon retirement is debited to additional paid-in capital to
the extent of the specific or average additional paid-in capital when the shares were
issued and to retained earnings for the remaining balance.
2.6.18 Pension Cost
Pension cost is actuarially determined using the projected unit credit method. This
method reflects services rendered by employees up to the date of valuation and
incorporates assumptions concerning employees’ projected salaries. Actuarial
valuations are conducted with sufficient regularity, with option to accelerate when
significant changes to underlying assumptions occur. Pension cost includes current
service cost, interest cost, expected return on any plan assets, actuarial gains and
losses and the effect of any curtailment or settlement.
The net pension asset recognized by the Globe Group in respect of the defined benefit
pension plan is the lower of: (a) the fair value of the plan assets less the present value
of the defined benefit obligation at the end of the reporting period, together with
adjustments for unrecognized actuarial gains or losses that shall be recognized in later
periods; or (b) the total of any cumulative unrecognized net actuarial losses and past
service cost and the present value of any economic benefits available in the form of
refunds from the plan or reductions in future contributions to the plan. The defined
benefit obligation is calculated annually by an independent actuary using the projected
unit credit method. The present value of the defined benefit obligation is determined
by using risk-free interest rates of government bonds that have terms to maturity
approximating the terms of the related pension liabilities or by applying a single
weighted average discount rate that reflects the estimated timing and amount of
benefit payments.
A portion of actuarial gains and losses is recognized as income or expense if the
cumulative unrecognized actuarial gains and losses at the end of the previous
reporting period exceeded the greater of 10% of the present value of defined benefit
obligation or 10% of the fair value of plan assets. These gains and losses are
recognized over the expected average remaining working lives of the employees
participating in the plan.
*SGVMC114676*
- 30 2.6.19 Borrowing Costs
Borrowing costs are capitalized if these are directly attributable to the acquisition,
construction or production of a qualifying asset. Capitalization of borrowing costs
commences when the activities for the asset’s intended use are in progress and
expenditures and borrowing costs are being incurred. Borrowing costs are capitalized
until the assets are ready for their intended use. These costs are amortized using the
straight-line method over the EUL of the related property and equipment. If the
resulting carrying amount of the asset exceeds its recoverable amount, an impairment
loss is recognized. Borrowing costs include interest charges and other related
financing charges incurred in connection with the borrowing of funds, as well as
exchange differences arising from foreign currency borrowings used to finance these
projects to the extent that they are regarded as an adjustment to interest costs.
Premiums on long-term debt are included under the “Long-term debt” account in the
consolidated statements of financial position and are amortized using the effective
interest rate method.
Other borrowing costs are recognized as expense in the period in which these are
incurred.
2.6.20 Leases
The determination of whether an arrangement is, or contains a lease, is based on the
substance of the arrangement and requires an assessment of whether the fulfillment of
the arrangement is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset. A reassessment is made after inception
of the lease only if one of the following applies:
·
·
·
·
there is a change in contractual terms, other than a renewal or extension of the
arrangement;
a renewal option is exercised or an extension granted, unless that term of the
renewal or extension was initially included in the lease term;
there is a change in the determination of whether fulfillment is dependent on a
specified asset; or
there is a substantial change to the asset.
Where a reassessment is made, lease accounting shall commence or cease from the
date when the change in circumstances gave rise to the reassessment for any of the
scenarios above, and at the date of renewal or extension period for the second
scenario.
2.6.20.1 Group as Lessee
Finance leases, which transfer to the Globe Group substantially all the risks
and benefits incidental to ownership of the leased item, are capitalized at
the inception of the lease at the fair value of the leased property or, if lower,
at the present value of the minimum lease payments and included in the
“Property and equipment” account with the corresponding liability to the
lessor included in the “Other long-term liabilities” account in the
consolidated statements of financial position. Lease payments are
apportioned between the finance charges and reduction of the lease liability
so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged directly as “Interest expense” in the
consolidated statements of comprehensive income.
*SGVMC114676*
- 31 Capitalized leased assets are depreciated over the shorter of the EUL of the
assets and the respective lease terms.
Leases where the lessor retains substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Operating lease
payments are recognized as an expense in profit or loss on a straight-line
basis over the lease term.
2.6.20.2 Group as Lessor
Finance leases, where the Globe Group transfers substantially all the risk
and benefits incidental to ownership of the leased item to the lessee, are
included in the consolidated statements of financial position under
“Prepayments and other current assets” account. A lease receivable is
recognized equivalent to the net investment (asset cost) in the lease. All
income resulting from the receivable is included in the “Interest income”
account in the consolidated statements of comprehensive income.
Leases where the Globe Group does not transfer substantially all the risk
and benefits of ownership of the assets are classified as operating leases.
Initial direct costs incurred in negotiating operating leases are added to the
carrying amount of the leased asset and recognized over the lease term on
the same basis as the rental income. Contingent rents are recognized as
revenue in the period in which they are earned.
2.6.21 General, Selling and Administrative Expenses
General, selling and administrative expenses, except for rent, are charged against
current operations as incurred.
2.6.22 Foreign Currency Transactions
The functional and presentation currency of the Globe Group is the Philippine Peso,
except for EHL whose functional currency is the Hong Kong Dollar (HKD).
Transactions in foreign currencies are initially recorded at the functional currency rate
prevailing at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the functional currency rate of exchange ruling
at the end of reporting period.
Nonmonetary items that are measured in terms of historical cost in a foreign currency
are translated using the exchange rate as at the date of the initial transaction and are
not subsequently restated. Nonmonetary items measured at fair value in a foreign
currency are translated using the exchange rate at the date when the fair value was
determined. All foreign exchange differences are taken to profit or loss, except where
it relates to equity securities where gains or losses are recognized directly in other
comprehensive income.
As at the reporting date, the assets and liabilities of EHL are translated into the
presentation currency of the Globe Group at the rate of exchange prevailing at the end
of reporting period and its profit or loss is translated at the monthly weighted average
exchange rates during the year. The exchange differences arising on the translation
are taken directly to a separate component of equity under “Other reserves” account.
Upon disposal of EHL, the cumulative translation adjustments relating to EHL shall
be recognized in profit or loss.
*SGVMC114676*
- 32 2.6.23 EPS
Basic EPS is computed by dividing earnings applicable to common stock by the
weighted average number of common shares outstanding, after giving retroactive
effect for any stock dividends, stock splits or reverse stock splits during the period.
Diluted EPS is computed by dividing net income by the weighted average number of
common shares outstanding during the period, after giving retroactive effect for any
stock dividends, stock splits or reverse stock splits during the period, and adjusted for
the effect of dilutive options and dilutive convertible preferred shares. Outstanding
stock options will have a dilutive effect under the treasury stock method only when
the average market price of the underlying common share during the period exceeds
the exercise price of the option. If the required dividends to be declared on
convertible preferred shares divided by the number of equivalent common shares,
assuming such shares are converted, would decrease the basic EPS, then such
convertible preferred shares would be deemed dilutive. Where the effect of the
assumed conversion of the preferred shares and the exercise of all outstanding options
have anti-dilutive effect, basic and diluted EPS are stated at the same amount.
2.6.24 Operating Segment
The Globe Group’s major operating business units are the basis upon which the Globe
Group reports its primary segment information. The Globe Group’s business
segments consist of: (1) mobile communication services; (2) wireline communication
services; and (3) others. The Globe Group generally accounts for intersegment
revenues and expenses at agreed transfer prices.
2.6.25 Contingencies
Contingent liabilities are not recognized in the consolidated financial statements.
These are disclosed unless the possibility of an outflow of resources embodying
economic benefits is remote. Contingent assets are not recognized in the consolidated
financial statements but are disclosed when an inflow of economic benefits is
probable.
2.6.26 Events after the Reporting Period
Any post period-end event up to the date of approval of the BOD of the consolidated
financial statements that provides additional information about the Globe Group’s
position at the end of reporting period (adjusting event) is reflected in the consolidated
financial statements. Any post period-end event that is not an adjusting event is
disclosed in the consolidated financial statements when material.
3. Management’s Significant Accounting Judgments and Use of Estimates
Judgments and Estimates
The preparation of the accompanying consolidated financial statements in conformity with PFRS
requires management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. The estimates and assumptions used
in the accompanying consolidated financial statements are based upon management’s evaluation
of relevant facts and circumstances as of the date of the consolidated financial statements. Actual
results could differ from such estimates.
*SGVMC114676*
- 33 Judgments and estimates are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
3.1 Judgments
3.1.1
Leases
The Globe Group has entered into various lease agreements as lessee and lessor. The
Globe Group has determined that it retains all the significant risks and rewards on
equipment and office spaces leased out on operating lease and various items of
property and equipment acquired through finance lease.
3.1.2
Fair value of financial instruments
Where the fair values of financial assets and financial liabilities recorded on the
consolidated statements of financial position cannot be derived from active markets,
they are determined using a variety of valuation techniques that include the use of
mathematical models. The input to these models is taken from observable markets
where possible, but where this is not feasible, a degree of judgment is required in
establishing fair values. The judgments include considerations of liquidity and model
inputs such as correlation and volatility for longer-dated derivatives.
As of December 31, 2010, 2009 and 2008, the fair value of financial assets and
liabilities that were determined using valuation techniques, inputs and assumptions are
based on market observable data and conditions and reflect appropriate risk
adjustments that market participants would make for credit and liquidity risks existing
as of the periods indicated.
The Globe Group considers a market as active if it is one in which transactions take
place regularly on an arm’s-length basis. On the other hand, the Globe Group
considers a market as inactive if there is a significant decline in the volume and level
of trading activity and the available prices vary significantly over time among market
participants or the prices are not current.
3.1.3
HTM investments
The classification as HTM investments requires significant judgment. In making this
judgment, the Globe Group evaluates its intention and ability to hold such
investments to maturity. If the Globe Group fails to keep these investments to
maturity other than in certain specific circumstances - for example, selling an
insignificant amount close to maturity - it will be required to reclassify the entire
portfolio as AFS investments. The investments would therefore be measured at fair
value and not at amortized cost.
3.1.4
Financial assets not quoted in an active market
The Globe Group classifies financial assets by evaluating, among others, whether the
asset is quoted or not in an active market. Included in the evaluation on whether a
financial asset is quoted in an active market is the determination on whether quoted
prices are readily and regularly available, and whether those prices represent actual
and regularly occurring market transactions on an arm’s-length basis.
*SGVMC114676*
- 34 3.1.5
Allocation of goodwill to cash-generating units
The Globe Group allocated the carrying amount of goodwill to the mobile content and
application development services business CGU, for the Group believes that this
CGU represents the lowest level within the Globe Group at which the goodwill is
monitored for internal management reporting purposes; and not larger than an
operating segment determined in accordance with PFRS 8.
3.1.6
Determination of whether the Globe Group is acting as a principal or an agent
The Globe Group assesses its revenue arrangements against the following criteria to
determine whether it is acting as a principal or an agent:
· whether the Globe Group has primary responsibility for providing the goods and
services;
· whether the Globe Group has inventory risk;
· whether the Globe Group has discretion in establishing prices; and
· whether the Globe Group bears the credit risk.
If the Globe Group has determined it is acting as a principal, the Group recognizes
revenue on a gross basis with the amount remitted to the other party being accounted
for as part of costs and expenses.
If the Globe Group has determined it is acting as an agent, only the net amount
retained is recognized as revenue.
The Globe Group assessed its revenue arrangements and concluded that it is acting as
principal in some arrangements and as an agent in other arrangements.
3.2 Estimates
3.2.1
Revenue recognition
The Globe Group’s revenue recognition policies require management to make use
of estimates and assumptions that may affect the reported amounts of revenues
and receivables.
The Globe Group estimates the fair value of points awarded under its loyalty
programmes, which are within the scope of Philippine Interpretation IFRIC 13,
based on historical trend of availment. As of December 31, 2010 and 2008, the
estimated liability for unredeemed points included in “Unearned revenues”
amounted to =
P121.81 million and =
P8.05 million, respectively. There are no
loyalty programs qualifying under IFRIC 13 as of December 31, 2009.
As a result of continuous improvements in the Globe Group’s estimation process,
the Group recognized a one-time upward adjustment (included in the “Service
revenues” account of the statements of comprehensive income) amounting to
=526.00 million in the fourth quarter of 2010 representing prepaid load credits
P
that have either expired or have already been used up.
*SGVMC114676*
- 35 3.2.2
Allowance for impairment losses on receivables
The Globe Group maintains an allowance for impairment losses at a level
considered adequate to provide for potential uncollectible receivables. The Globe
Group performs a regular review of the age and status of these accounts, designed
to identify accounts with objective evidence of impairment and provide the
appropriate allowance for impairment losses. The review is accomplished using a
combination of specific and collective assessment approaches, with the
impairment losses being determined for each risk grouping identified by the
Globe Group. The amount and timing of recorded expenses for any period would
differ if the Globe Group made different judgments or utilized different
methodologies. An increase in allowance for impairment losses would increase
the recorded operating expenses and decrease current assets.
Impairment losses on receivables for the years ended December 31, 2010, 2009
and 2008 amounted to =
P1,285.53 million, =
P754.63 million and P
=979.78 million,
respectively (see Note 23). Receivables, net of allowance for impairment losses,
amounted to =
P8,374.12million, P
=6,583.23 million and =
P7,473.35 million as of
December 31, 2010, 2009 and 2008, respectively (see Note 4).
3.2.3
Obsolescence and market decline
The Globe Group, in determining the NRV, considers any adjustment necessary
for obsolescence which is generally provided 100% for nonmoving items after a
certain period. The Globe Group adjusts the cost of inventory to the recoverable
value at a level considered adequate to reflect market decline in the value of the
recorded inventories. The Globe Group reviews the classification of the
inventories and generally provides adjustments for recoverable values of new,
actively sold and slow-moving inventories by reference to prevailing values of the
same inventories in the market.
The amount and timing of recorded expenses for any period would differ if
different judgments were made or different estimates were utilized. An increase
in allowance for obsolescence and market decline would increase recorded
operating expenses and decrease current assets.
Inventory obsolescence and market decline for the years ended December 31,
2010, 2009 and 2008 amounted to P
=42.12 million, P
=58.74 million and
=262.10 million, respectively (see Note 23).
P
Inventories and supplies, net of allowances, amounted to =
P1,839.33 million,
P1,653.75 million and =
=
P1,124.32 million as of December 31, 2010, 2009 and
2008, respectively (see Note 5).
3.2.4
ARO
The Globe Group is legally required under various contracts to restore leased
property to its original condition and to bear the costs of dismantling and
deinstallation at the end of the contract period. These costs are accrued based on
an in-house estimate, which incorporates estimates of asset retirement costs and
interest rates. The Globe Group recognizes the present value of these obligations
and capitalizes the present value of these costs as part of the balance of the related
property and equipment accounts, which are being depreciated and amortized on a
*SGVMC114676*
- 36 straight-line basis over the EUL of the related asset or the lease term, whichever is
shorter. The market risk premium was excluded from the estimate of the fair
value of the ARO because a reasonable and reliable estimate of the market risk
premium is not obtainable.
Since a market risk premium is unavailable, fair value is assumed to be the
present value of the obligations. The present value of dismantling costs is
computed based on an average credit adjusted risk free rate of 9.27%, 10.09% and
11.17% in 2010, 2009 and 2008, respectively. Assumptions used to compute
ARO are reviewed and updated annually.
The amount and timing of recorded expenses for any period would differ if
different judgments were made or different estimates were utilized. An increase
in ARO would increase recorded operating expenses and increase noncurrent
liabilities.
The Globe Group updated its assumptions on timing of settlement and estimated
cash outflows arising from ARO on its leased premises. As a result of the
changes in estimates, the Globe group adjusted downward its ARO liability
(included under “Other long-term liabilities” account) by P
=64.45 million,
=7.20 million and =
P
P714.78 million in 2010, 2009 and 2008 against the book value
of the assets on leased premises (see Note 15).
As of December 31, 2010, 2009 and 2008, ARO amounted to P
=1,341.53 million,
=1,269.29 million and =
P
P1,081.41 million, respectively (see Note 15).
3.2.5
EUL of property and equipment, investment property and intangible assets
Globe Group reviews annually the EUL of these assets based on expected asset
utilization as anchored on business plans and strategies that also consider
expected future technological developments and market behavior. It is possible
that future results of operations could be materially affected by changes in these
estimates brought about by changes in the factors mentioned.
A reduction in the EUL of property and equipment, investment property and
intangible assets would increase the recorded depreciation and amortization
expense and decrease noncurrent assets.
The EUL of property and equipment of the Globe Group are as follows:
Years
Telecommunications equipment:
Tower
Switch
Outside plant, cellsite structures
and improvements
Distribution dropwires and other
wireline assets
Cellular equipment and others
Buildings
Leasehold improvements
Investments in cable systems
Office equipment
Transportation equipment
20
7 and 10
10-20
2-10
3-10
20
5 years or lease term, whichever is shorter
15
3-5
3-5
*SGVMC114676*
- 37 The EUL of investment property is 20 years.
Intangible assets comprising of licenses and application software are amortized
over the EUL of the related hardware or equipment ranging from 3 to 10 years or
life of the telecommunications equipment where it is assigned. Customer
contracts acquired during business combination are amortized over 5 years.
In 2010, 2009 and 2008, the Globe Group changed the EUL of certain wireless
and wireline telecommunications equipment resulting from new information
affecting the expected utilization of these assets. The net effect of the change in
EUL resulted in higher depreciation of =
P119.03 million and =
P347.62 million in
2010 and 2009, respectively, and lower depreciation of P
=159.76 million in 2008.
As of December 31, 2010, 2009 and 2008, property and equipment, investment
property and intangible assets amounted to P
=104,972.70 million, P
=104,586.34
million and P
=96,811.28 million, respectively (see Notes 7, 8 and 9).
3.2.6
Asset impairment
3.2.6.1 Impairment of nonfinancial assets other than goodwill
The Globe Group assesses impairment of assets (property and equipment,
investment property, intangible assets and investments in joint ventures)
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The factors that the Globe
Group considers important which could trigger an impairment review
include the following:
·
·
·
significant underperformance relative to expected historical or
projected future operating results;
significant changes in the manner of use of the acquired assets or the
strategy for the overall business; and
significant negative industry or economic trends.
An impairment loss is recognized whenever the carrying amount of an
asset or investment exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s net selling price and value in use. The
net selling price is the amount obtainable from the sale of an asset in an
arm’s length transaction while value in use is the present value of
estimated future cash flows expected to arise from the continuing use of
an asset and from its disposal at the end of its useful life. Recoverable
amounts are estimated for individual assets or investments or, if it is not
possible, for the CGU to which the asset belongs.
For impairment loss on specific assets or investments, the recoverable
amount represents the net selling price.
*SGVMC114676*
- 38 For the Globe Group, the CGU is the combined mobile and wireline asset
groups of Globe Telecom and Innove. This asset grouping is predicated
upon the requirement contained in Executive Order (EO) No.109 and RA
No.7925 requiring licensees of Cellular Mobile Telephone System
(CMTS) and International Digital Gateway Facility (IGF) services to
provide 400,000 and 300,000 LEC lines, respectively, as a condition for
the grant of such licenses.
In determining the present value of estimated future cash flows expected
to be generated from the continued use of the assets or holding of an
investment, the Globe Group is required to make estimates and
assumptions that can materially affect the consolidated financial
statements.
Property and equipment, investment property, intangible assets, and
investments in joint ventures amounted to =
P105,169.71 million,
=104,820.14 million and =
P
P96,884.81 million as of December 31, 2010,
2009 and 2008, respectively (see Notes 7, 8, 9 and 10).
3.2.6.2 Impairment of goodwill
The Globe Group’s impairment test for goodwill is based on value in use
calculations that use a discounted cash flow model. The cash flows are
derived from the budget for the next five years and do not include
restructuring activities that the Group is not yet committed to or
significant future investments that will enhance the asset base of the CGU
being tested. The recoverable amount is most sensitive to the discount
rate used for the discounted cash flow model as well as the expected
future cash inflows and the growth rate used for extrapolation purposes.
As of December 31, 2010 and 2009, the carrying value of goodwill
amounted to =
P327.13 million (see Note 9).
Goodwill acquired through business combination with EGG Group was
allocated to the mobile content and applications development services
business CGU, which is part of the “Others” reporting segment.
The recoverable amount of the CGU which exceeds the carrying amount
by =
P165.30 million and =
P63.00 million as of December 31, 2010 and
2009, respectively, has been determined based on value in use
calculations using cash flow projections from financial budgets covering a
5-year period. The pretax discount rate applied to cash flow projections is
12% in 2010 and 2009, and cash flows beyond the 5-year period are
extrapolated using a 3% long-term growth rate in 2010 and 2009.
3.2.7
Deferred income tax assets
The carrying amounts of deferred income tax assets are reviewed at each
reporting date and reduced to the extent that it is no longer probable that
sufficient taxable income will be available to allow all or part of the
deferred income tax assets to be utilized (see Note 24).
*SGVMC114676*
- 39 As of December 31, 2010, 2009 and 2008, Innove and EGG Group
has net deferred income tax assets amounting to P
=670.59 million,
=742.54 million and P
P
=523.72 million, respectively. As of December 31,
2010, 2009 and 2008, Globe Telecom has net deferred income tax
liabilities amounting to P
=4,620.49 million, P
=4,627.29 million and
=4,590.43 million, respectively (see Note 24). Globe Telecom and
P
Innove have no unrecognized deferred income tax assets as of
December 31, 2010, 2009 and 2008. GXI has not recognized deferred
income tax assets since there is no assurance that GXI will generate
sufficient taxable income to allow all or part of it to be utilized. As of
December 31, 2010 and 2009, Innove and EGG Group’s recognized
deferred income tax assets from NOLCO amounted to =
P13.50 million
and P
=138.05 million and MCIT amounted to P
=0.95 million and
=46.71 million, respectively (see Note 24).
P
3.2.8
Financial assets and liabilities
Globe Group carries certain financial assets and liabilities at fair value,
which requires extensive use of accounting estimates and judgment.
While significant components of fair value measurement were determined
using verifiable objective evidence (i.e., foreign exchange rates, interest
rates), the amount of changes in fair value would differ if the Globe
Group utilized different valuation methodologies. Any changes in fair
value of these financial assets and liabilities would affect the consolidated
statements of comprehensive income and consolidated statements of
changes in equity.
Financial assets comprising AFS investments and derivative assets
carried at fair values as of December 31, 2010, 2009 and 2008, amounted
to =
P121.77 million, P
=118.03 million and P
=230.34 million, respectively,
and financial liabilities comprising of derivative liabilities carried at
fair values as of December 31, 2010, 2009 and 2008, amounted to
=245.87 million, P
P
=92.46 million and P
=185.65 million, respectively
(see Note 28.10).
3.2.9
Pension and other employee benefits
The determination of the obligation and cost of pension is dependent on
the selection of certain assumptions used in calculating such amounts.
Those assumptions include, among others, discount rates, expected
returns on plan assets and salary rates increase (see Note 18). In
accordance with PAS 19, Employee Benefits, actual results that differ
from the Globe Group’s assumptions, subject to the 10% corridor test, are
accumulated and amortized over future periods and therefore, generally
affect the recognized expense and recorded obligation in such future
periods.
As of December 31, 2010, 2009 and 2008, Globe Group has
unrecognized net actuarial losses of P
=781.01 million, =
P799.54 million,
and P
=115.40 million, respectively (see Note 18.2).
*SGVMC114676*
- 40 The Globe Group also determines the cost of equity-settled transactions
using assumptions on the appropriate pricing model. Significant
assumptions for the cost of share-based payments include, among others,
share price, exercise price, option life, risk-free interest rate, expected
dividend and expected volatility rate.
Cost of share-based payments in 2010, 2009 and 2008 amounted to
=104.79 million, P
P
=126.44 million and P
=182.32 million, respectively (see
Notes 16 and 18.1).
The Globe Group also estimates other employee benefit obligations and
expenses, including cost of paid leaves based on historical leave
availments of employees, subject to the Globe Group’s policy. These
estimates may vary depending on the future changes in salaries and actual
experiences during the year.
The accrued balance of other employee benefits (included in the
“Accounts payable and accrued expenses” account and in the “Other
long-term liabilities” account in the consolidated statements of financial
position) as of December 31, 2010, 2009 and 2008 amounted to
=406.14 million, P
P
=371.61 million and P
=340.47 million, respectively.
While the Globe Group believes that the assumptions are reasonable and
appropriate, significant differences between actual experiences and
assumptions may materially affect the cost of employee benefits and
related obligations.
3.2.10 Contingencies
Globe Telecom and Innove are currently involved in various legal
proceedings. The estimate of the probable costs for the resolution of
these claims has been developed in consultation with internal and external
counsel handling Globe Telecom and Innove’s defense in these matters
and is based upon an analysis of potential results. Globe Telecom and
Innove currently do not believe that these proceedings will have a
material adverse effect on the consolidated statements of financial
position. It is possible, however, that future results of operations could be
materially affected by changes in the estimates or in the effectiveness of
the strategies relating to these proceedings (see Note 26).
3.2.11 Purchase Price Allocation
As of December 31, 2008, the purchase price allocation relating to the
Globe Group’s acquisition of EGG Group has been prepared on a
preliminary basis. The provisional fair values of the assets acquired and
liabilities assumed as of date of acquisition were based on the net book
values of the identifiable assets and liabilities since these approximate the
fair values. The difference between the total consideration and the net
assets amounting to P
=346.99 million was initially allocated to goodwill as
of December 31, 2008.
*SGVMC114676*
- 41 The valuation of the intangible assets was completed in June 2009 and
showed that the fair value at the date of acquisition was P
=28.38 million.
The 2008 comparative information has been restated to reflect this
adjustment. The value of intangible assets and deferred tax liability
increased by P
=28.38 million and P
=8.51 million, respectively. This
resulted in a reduction in goodwill by P
=19.87 million (see Note 9).
4. Receivables
This account consists of receivables from:
Subscribers
Traffic settlements - net
Others
Less allowance for impairment losses
Subscribers
Traffic settlements and others
Notes
2010
28.2.2
16, 28.2.2
28.2.2
P
=8,038,451
2,130,238
658,878
10,827,567
28.2.2
28.2.2
2,173,912
279,532
2,453,444
P
=8,374,123
2009
2008
(In Thousand Pesos)
=4,980,195
P
P4,563,825
=
2,319,273
3,618,010
634,751
478,170
7,934,219
8,660,005
1,162,792
188,199
1,350,991
=6,583,228
P
785,812
400,847
1,186,659
=7,473,346
P
Subscriber receivables arise from wireless and wireline communications and data services
provided under postpaid arrangements.
Amounts collected from wireless subscribers under prepaid arrangements are reported under
“Unearned revenues” in the consolidated statements of financial position and recognized as
revenues upon actual usage of airtime value or upon expiration of the prepaid credit. The
unearned revenues from these subscribers amounted to P
=2,402.75 million, P
=2,981.88 million and
=3,247.71 million as of December 31, 2010, 2009 and 2008, respectively.
P
Traffic settlements receivable are presented net of traffic settlements payable from the same
carrier amounted to =
P4,099.08 million, =
P3,130.28 million and P
=5,297.07 million as of
December 31, 2010, 2009 and 2008, respectively.
Receivables are non-interest bearing and are generally collectible in the short-term.
*SGVMC114676*
- 42 5. Inventories and Supplies
This account consists of:
2010
At cost:
Modems and accessories
Spare parts and supplies
Handsets, devices and accessories
SIM packs
Tattoo prepaid kits
Callcards and others
At NRV:
Handsets, devices and accessories
Spare parts and supplies
Modems and accessories
SIM packs
Tattoo prepaid kits
Call cards and others
2009
(In Thousand Pesos)
2008
P
=592,709
1,454
98
–
–
22,244
616,505
P–
=
98
980
1,624
81,842
154,466
239,010
=–
P
899
–
2,749
29,693
21,235
54,576
518,145
298,331
240,578
42,928
27,738
95,108
1,222,828
P
=1,839,333
260,442
464,476
615,514
69,347
–
4,961
1,414,740
=1,653,750
P
439,028
351,676
200,005
76,172
–
2,865
1,069,746
=1,124,322
P
Inventories recognized as expense during the year amounting to =
P4,281.08 million,
=3,006.69 million and =
P
P3,379.28 million in 2010, 2009 and 2008, respectively, are included as
part of “Cost of sales” and “Impairment losses and others” accounts (see Note 23) in the
consolidated statements of comprehensive income. An insignificant amount is included under
“General, selling and administrative expenses” as part of “Utilities, supplies and other
administrative expenses” account (see Note 21).
Cost of sales incurred consists of:
2010
Handsets, devices and accessories
Tattoo prepaid kits
SIM packs
Modems and accessories
Spare parts and supplies
Callcards and others
P
=3,185,163
597,430
274,882
141,272
13,164
27,049
P
=4,238,960
2009
2008
(In Thousand Pesos)
=1,602,018
P
P1,931,915
=
810,655
234,428
367,120
517,542
129,616
138,305
16,630
7,256
21,911
287,726
=2,947,950
P
=3,117,172
P
*SGVMC114676*
- 43 -
6. Prepayments and Other Current Assets
This account consists of:
Notes
Prepayments
Advance payments to suppliers and
contractors
Input VAT – net
Creditable withholding tax
Loan receivable from Globe Telecom
retirement fund
Miscellaneous receivables - net
Other current assets
2010
P
=983,545
2009
(In Thousand Pesos)
=534,304
P
2008
=617,379
P
25.3
764,699
954,636
494,942
1,143,891
889,941
334,723
2,114,203
334,579
210,182
11, 28.10
28.10
16, 28.10
–
476,050
1,030,326
P
=4,704,198
–
853,243
443,218
=4,199,320
P
800,000
515,966
514,120
=5,106,429
P
As of December 31, 2010, Innove, GXI and EGG reported net input VAT amounted to P
=954.64
million, net of output VAT of =
P102.45 million. As of December 31, 2009, Innove and GXI
reported net input VAT amounted to =
P889.94 million, net of output VAT of P
=89.26 million. As of
December 31, 2008, Innove, GXI and EGG Group reported net input VAT amounted to =
P334.58
million, net of output VAT of =
P157.05 million.
The “Prepayments” account includes prepaid insurance and rent, among others.
In 2008, the Globe Group granted a loan to the retirement fund amounting to =
P800.00 million with
interest at 6.20%. Upon maturity in 2009, the loan was rolled over until September 2014 with
7.75% interest and reclassified under “Other noncurrent assets” account (see Note 11).
The “Other current assets” account includes accrued interest receivable and other receivables,
among others.
7. Property and Equipment
The rollforward analysis of this account follows:
2010
Cost
At January 1
Additions
Retirements/disposals
Reclassifications/adjustments
At December 31
Accumulated Depreciation,
Amortization and
Impairment Losses
At January 1
Depreciation and amortization
Retirements/disposals
At December 31
Net Book Value at
December 31
Telecommunications
Equipment
Buildings and
Leasehold
Improvements
Investments in
Cable Systems
= 161,393,653
P
1,071,562
(408,040)
12,041,649
174,098,824
= 24,088,931
P
185,264
(29,092)
1,299,564
25,544,667
= 14,444,009
P
–
–
(1,415,706)
13,028,303
=6,049,431
P
228,646
(87,113)
197,602
6,388,566
= 2,074,149
P
305,186
(237,996)
11,883
2,153,222
99,668,498
14,403,724
(585,504)
113,486,718
11,009,763
1,054,839
(109,091)
11,955,511
4,758,210
899,440
(921,615)
4,736,035
5,065,820
693,641
(116,595)
5,642,866
1,431,233
265,153
(199,296)
1,497,090
= 745,700
P
= 656,132
P
= 60,612,106
P
= 13,589,156
P
= 8,292,268
P
Office Transportation
Equipment
Equipment
(In Thousand Pesos)
Land
= 1,551,558
P
504
(14,025)
(23,705)
1,514,332
Assets Under
Construction
Total
P14,025,661 =
=
P223,627,392
17,506,382
19,297,544
(4,162)
(780,428)
(15,100,321)
(2,989,034)
16,427,560
239,155,474
–
–
–
–
–
–
–
–
= 1,514,332
P
= 16,427,560
P
121,933,524
17,316,797
(1,932,101)
137,318,220
= 101,837,254
P
*SGVMC114676*
- 44 2009
Telecommunications
Equipment
Cost
At January 1
Additions
Retirements/disposals
Reclassifications/adjustments
At December 31
Accumulated Depreciation,
Amortization and
Impairment Losses
At January 1
Depreciation and amortization
Retirements/disposals
At December 31
Net Book Value at
December 31
=148,988,985
P
1,308,160
(9,013,358)
20,109,866
161,393,653
91,235,779
13,800,566
(5,367,847)
99,668,498
Buildings and
Leasehold
Improvements
=22,235,361
P
169,162
(13,228)
1,697,636
24,088,931
Investments in
Cable Systems
=10,185,208
P
353
–
4,258,448
14,444,009
Office
Transportation
Equipment
Equipment
(In Thousand Pesos)
Land
Assets Under
Construction
=5,479,851
P
379,911
(9,418)
199,087
6,049,431
=2,125,186
P
225,515
(111,951)
(164,601)
2,074,149
=1,495,841
P
50,511
–
5,206
1,551,558
=13,980,362
P
22,469,550
(24,258)
(22,399,993)
14,025,661
–
–
–
–
–
–
–
–
Total
=204,490,794
P
24,603,162
(9,172,213)
3,705,649
223,627,392
9,984,888
969,115
55,760
11,009,763
3,918,995
787,648
51,567
4,758,210
4,558,370
497,005
10,445
5,065,820
1,252,372
305,715
(126,854)
1,431,233
110,950,404
16,360,049
(5,376,929)
121,933,524
=61,725,155
P
=13,079,168
P
=9,685,799
P
=983,611
P
=642,916
P
=1,551,558
P
=14,025,661
P
=101,693,868
P
Telecommunications
Equipment
Buildings and
Leasehold
Improvements
Investments in
Cable Systems
Office
Transportation
Equipment
Equipment
(In Thousand Pesos)
Land
Assets Under
Construction
Total
2008
Cost
At January 1
Additions (see Note 9)
Retirements/disposals
Reclassifications/adjustments
At December 31
Accumulated Depreciation,
Amortization and
Impairment Losses
At January 1
Depreciation and amortization
Retirements/disposals
At December 31
Net Book Value at
December 31
=139,902,905
P
5,134,081
(304,569)
4,256,568
148,988,985
=21,364,791
P
71,342
(5,377)
804,605
22,235,361
=9,928,378
P
97,936
–
158,894
10,185,208
=5,127,124
P
494,805
(13,325)
(128,753)
5,479,851
=1,643,361
P
495,182
(226,391)
213,034
2,125,186
=948,315
P
547,526
–
–
1,495,841
78,114,745
13,790,032
(668,998)
91,235,779
9,087,641
898,730
(1,483)
9,984,888
3,246,716
672,279
–
3,918,995
4,247,291
593,715
(282,636)
4,558,370
1,071,086
279,015
(97,729)
1,252,372
–
–
–
–
–
–
–
–
=921,481
P
=872,814
P
=1,495,841
P
=13,980,362
P
=57,753,206
P
=12,250,473
P
=6,266,213
P
P8,380,425
=
13,345,254
(30,008)
(7,715,309)
13,980,362
=187,295,299
P
20,186,126
(579,670)
(2,410,961)
204,490,794
95,767,479
16,233,771
(1,050,846)
110,950,404
=93,540,390
P
Assets under construction include intangible components of a network system which are
reclassified to depreciable intangible assets only when assets become available for use
(see Note 9).
Investments in cable systems include the cost of the Globe Group’s ownership share in the
capacity of certain cable systems under a joint venture or a consortium or private cable set-up and
indefeasible rights of use (IRUs) of circuits in various cable systems. It also includes the cost of
cable landing station and transmission facilities where the Globe Group is the landing party.
Fully depreciated property and equipment still being used in the network amounted to
=
P52,467.14 million, =
P35,832.53 million and P
=29,537.04 million as of December 31, 2010, 2009
and 2008, respectively.
The carrying values of property and equipment held under finance leases where the Globe Group
is the lessee are immaterial.
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 5.61%, 3.96%, and
2.29% capitalization rates in 2010, 2009 and 2008, respectively. The Globe Group’s total
capitalized borrowing costs amounted to P
=1,091.21 million, P
=979.03 million and P
=466.19 million
for the years ended December 31, 2010, 2009 and 2008, respectively (see Note 22).
*SGVMC114676*
- 45 In 2009, the Globe Group entered into an exchange transaction with an equipment supplier
whereby Globe Group conveyed and transferred ownership of certain equipment and licenses in
exchange for more advanced systems. This exchange resulted in a gain amounting to
=
P568.12 million (as part of “Gain on disposal of property and equipment - net” in the consolidated
statements of comprehensive income), equivalent to the difference between the fair value of the
new equipment stipulated in the purchase agreement and the carrying amount of the old platforms
and equipment at the time the exchange was consummated.
In 2008, the Globe Group purchased a parcel of land from a related party amounting to
=547.53 million.
P
8. Investment Property
The rollforward analysis of this account follows:
2010
Cost
At January 1
Reclassifications/adjustments
At December 31
Accumulated Depreciation
At January 1
Depreciation
Reclassifications/adjustments
At December 31
Net Book Value at December 31
2009
(In Thousand Pesos)
2008
P
=390,641
–
390,641
=390,641
P
–
390,641
=403,687
P
(13,046)
390,641
153,902
22,547
–
176,449
P
=214,192
131,418
22,547
(63)
153,902
=236,739
P
112,480
23,297
(4,359)
131,418
=259,223
P
Investment property represents the portion of a building that was held for lease to third parties in
2009 and 2008 (see Note 25.1b).
The details of income and expenses related to the investment property follow:
2010
Lease income
Direct expenses
P
=–
23,450
2009
(In Thousand Pesos)
=31,274
P
23,396
2008
P41,690
=
19,973
The fair value of the investment property, as determined by market data approach, amounted to
=
P595.54 million based on the report issued by an independent appraiser dated September 23, 2010.
*SGVMC114676*
- 46 9. Intangible Assets and Goodwill
The rollforward analysis of this account follows:
2010
Licenses and
Application
Software
Cost
At January 1
Additions
Retirements/disposals
Reclassifications/
adjustments (Note 7)
At December 31
Accumulated Depreciation,
Amortization and
Impairment Losses
At January 1
Amortization
Retirements/disposals
Reclassifications/adjustments
At December 31
Net Book Value at December 31
P
=7,431,159
169,329
(128,606)
884,907
8,356,789
4,795,295
740,819
(120,561)
34,176
5,449,729
P
=2,907,060
Total
Customer
Intangible
Contracts
Assets
(In Thousand Pesos)
P
=28,381
–
–
–
28,381
8,514
5,676
–
–
14,190
P
=14,191
P
=7,459,540
169,329
(128,606)
884,907
8,385,170
Goodwill
Total
Intangible
Assets and
Goodwill
P
=327,125
–
–
P
=7,786,665
169,329
(128,606)
–
327,125
4,803,809
746,495
(120,561)
34,176
5,463,919
P
=2,921,251
884,907
8,712,295
–
–
–
–
–
P
=327,125
4,803,809
746,495
(120,561)
34,176
5,463,919
P
=3,248,376
Goodwill
Total
Intangible
Assets and
Goodwill
2009
Licenses and
Application
Software
Cost
At January 1
Additions
Retirements/disposals
Reclassifications/
adjustments (Note 7)
At December 31
Accumulated Depreciation,
Amortization and
Impairment Losses
At January 1
Amortization
Retirements/disposals
Reclassifications/adjustments
At December 31
Net Book Value at December 31
Total
Customer
Intangible
Contracts
Assets
(In Thousand Pesos)
=6,968,572
P
99,164
(685,577)
=28,381
P
–
–
=6,996,953
P
99,164
(685,577)
=327,125
P
–
–
=7,324,078
P
99,164
(685,577)
1,049,000
7,431,159
–
28,381
1,049,000
7,459,540
–
327,125
1,049,000
7,786,665
3,985,282
997,320
(211,736)
24,429
4,795,295
=2,635,864
P
–
8,514
–
–
8,514
=19,867
P
3,985,282
1,005,834
(211,736)
24,429
4,803,809
=2,655,731
P
–
–
–
–
–
=327,125
P
3,985,282
1,005,834
(211,736)
24,429
4,803,809
=2,982,856
P
*SGVMC114676*
- 47 2008
Licenses and
Application
Software
Cost
At January 1
Additions
Retirements/disposals
Reclassifications/
adjustments (Note 7)
At December 31
Accumulated Depreciation,
Amortization and
Impairment Losses
At January 1
Amortization
Retirements/disposals
Reclassifications/adjustments
At December 31
Net Book Value at December 31
Total
Customer
Intangible
Contracts
Assets
(In Thousand Pesos)
Goodwill
Total
Intangible
Assets and
Goodwill
=5,548,510
P
167,671
(11,904)
=–
P
28,381
–
=5,548,510
P
196,052
(11,904)
=–
P
327,125
–
=5,548,510
P
523,177
(11,904)
1,264,295
6,968,572
–
28,381
1,264,295
6,996,953
–
327,125
1,264,295
7,324,078
3,113,887
771,000
(3,727)
104,122
3,985,282
=2,983,290
P
–
–
–
–
–
=28,381
P
3,113,887
771,000
(3,727)
104,122
3,985,282
=3,011,671
P
–
–
–
–
–
=327,125
P
3,113,887
771,000
(3,727)
104,122
3,985,282
=3,338,796
P
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; and 2) intangible assets identified to exist during acquisition of EGG
Group for its existing customer contracts. The fair value of customer contracts was determined at
=
P28.38 million based on multiple excess earnings approach using a discount rate of 15%.
The fair values of the identified assets and liabilities of EGG Group acquired in 2008 were:
Notes
Receivables - net
Prepayments and other current assets - net
Property and equipment - net
Intangible assets - net
4
28
7
Accounts payable and accrued expenses
Deferred tax liability
12
24
Net assets
Goodwill arising from acquisition
Total consideration, satisfied by cash
Final fair
Provisional
value upon
fair value
acquisition
upon acquisition
(In Thousand Pesos)
=35,308
P
=35,308
P
8,842
8,842
8,306
8,306
28,381
–
80,837
52,456
47,949
47,949
8,514
–
56,463
47,949
24,374
4,507
327,125
346,992
=351,499
P
=351,499
P
The goodwill is attributable to the significant synergies expected to arise after the Globe Group’s
acquisition of the EGG Group.
The business revenues and profit and loss of the EGG Group from June 26, 2008 to
December 31, 2008 are insignificant. If the acquisition had occurred on January 1, 2008, the
Globe Group’s service revenues and net income as of December 31, 2008 would have been
=
P62,948.16 million and P
=11,260.38 million, respectively.
*SGVMC114676*
- 48 -
10. Investments in Joint Ventures
This account consists of:
2010
Acquisition cost
At January 1
Acquisition during the year
At December 31
Accumulated equity in net gains (losses):
At January 1
Equity in net losses
Net foreign exchange difference
At December 31
Carrying value at December 31
2009
(In Thousand Pesos)
=252,610
P
–
252,610
P111,280
=
141,330
252,610
(44,760)
(2,968)
(47,728)
(7,866)
(55,594)
=197,016
P
(37,751)
(7,009)
(44,760)
25,950
(18,810)
=233,800
P
2008
=111,280
P
–
111,280
(28,023)
(9,728)
(37,751)
–
(37,751)
=73,529
P
10.1 Investment in BPI Globe BanKO Inc., A Savings Bank (BPI Globe BanKO)
On July 17, 2009, Globe acquired a 40% stake in BPI Globe BanKO (formerly Pilipinas
Savings Bank, Inc. or PS Bank) for =
P141.33 million, pursuant to a Shareholder Agreement
with Bank of the Philippine Islands (BPI), AC and PS Bank, and a Deed of Absolute Sale
with BPI. BPI Globe BanKO will have the capability to provide services to micro-finance
institutions and retail clients through mobile and related technology.
The Globe Group’s interest in BPI Globe BanKO is accounted for as follows:
2009
2010
(In Thousand Pesos)
Assets:
Current
Non-current
Liabilities:
Current
Non-current
Income
Expenses
P
=283,305
4,386
(151,150)
–
16,409
(24,839)
=147,745
P
3,650
(10,064)
–
12,572
(9,627)
10.2 Investment in Bridge Mobile Pte. Ltd. (BMPL)
Globe Telecom and other leading Asia Pacific mobile operators (JV partners) signed an
Agreement in 2004 (JV Agreement) to form a regional mobile alliance, which will operate
through a Singapore-incorporated company, BMPL. The JV company is a commercial
vehicle for the JV partners to build and establish a regional mobile infrastructure and
common service platform and deliver different regional mobile services to their subscribers.
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 T
*SGVMC114676*
- 49 elekomunikasi 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,
2010, Globe Telecom has invested a total of USD2.20 million in the joint venture.
The Globe Group’s interest in BMPL is accounted for as follows:
2010
Assets:
Current
Non-current
Liabilities:
Current
Income
Expenses
P
=67,722
2,744
(7,023)
19,693
(14,231)
2009
(In Thousand Pesos)
=104,280
P
1,769
(6,571)
17,872
(27,826)
2008
P79,110
=
13,014
(8,867)
18,083
(27,811)
The Globe Group has no share of any contingent liabilities as of December 31, 2010, 2009
and 2008.
11. Other Noncurrent Assets
This account consists of:
Prepaid pension
Loan receivable from Globe Telecom retirement
fund
Loan receivable from Bethlehem Holdings, Inc.
(BHI)
Miscellaneous deposits
Deferred input VAT
AFS investment in equity securities - net
Others - net
2009
2008
(In Thousand Pesos)
=1,055,444
P
=1,140,923
P
Notes
2010
18.2
P
=951,083
6
968,000
968,000
–
25.5
295,000
473,862
43,320
295,000
431,221
372,618
–
386,678
751,000
101,877
42,544
P
=2,875,686
81,727
134,400
=3,338,410
P
61,324
20,270
=2,360,195
P
28.10,
28.11
In 2008, the Globe Group granted a short-term loan to the Globe Telecom retirement fund
amounting to =
P800.00 million with interest at 6.20% (see Note 6). Upon maturity in 2009, the
loan was rolled over until September 2014 and bears interest at 7.75%. Further, in 2009, the
Globe Group granted an additional loan to the retirement fund amounting to =
P168.00 million
which bears interest at 7.75% and is due also in September 2014.
The Globe Telecom retirement fund utilized the loan to fund its investments in BHI, a company it
organized to invest in media ventures. In 2009, BHI acquired two operating companies.
On August 13 and December 21, 2009, the Globe Group granted five-year loans amounting to
=250.00 million and P
P
=45.00 million, respectively, to BHI at 8.275% interest. The P
=250.00 million
loan is covered by a pledge agreement whereby in the event of default, the Globe Group shall be
entitled to offset whatever amount is due to BHI from any unpaid fees of Broadcast Enterprises
and Affiliated Media Inc. (BEAM), BHI’s subsidiary, from the Globe Group. The =
P45.00 million
loan is fully secured by a chattel mortgage agreement dated December 21, 2009 between Globe
Group and BEAM (see Notes 16.3 and 25.5).
*SGVMC114676*
- 50 -
12. Accounts Payable and Accrued Expenses
This account consists of:
Notes
Accrued project costs
Accounts payable
Accrued expenses
Traffic settlements - net
Output VAT
Dividends payable
25.3
16
16
17.3
2010
(In Thousand
Pesos)
P
=8,638,119
5,716,859
5,587,799
2,172,426
–
–
P
=22,115,203
2009
2008
P8,081,684
=
5,769,355
4,898,403
1,866,012
172,735
50,492
=20,838,681
P
P5,258,619
=
5,156,011
4,837,196
1,545,539
174,472
60,637
=17,032,474
P
Traffic settlements payable are presented net of traffic settlements receivable from the same
carrier amounting to P
=2,335.95 million, =
P1,019.65 million and =
P4,313.98 million as of
December 31, 2010, 2009 and 2008, respectively.
As of December 31, 2010, Globe Telecom reported net output VAT amounting to P
=99.48 million,
net of input VAT of =
P359.93 million. As of December 31, 2009, Globe Telecom and EGG Group
reported net output VAT amounting to P
=172.74 million, net of input VAT of P
=361.59 million. As
of December 31, 2008, Globe Telecom reported net output VAT amounting to P
=174.47 million,
net of input VAT of =
P330.34 million.
The “Accrued expenses” account includes accruals for general, selling and administrative
expenses.
13. Provisions
The rollforward analysis of this account follows:
Notes
At beginning of year
Provisions/ reversals
Adjustments
At end of year
23
2010
P
=89,404
138,760
(3,776)
P
=224,388
2009
(In Thousand Pesos)
=202,514
P
(88,047)
(25,063)
=89,404
P
2008
=219,687
P
(5,031)
(12,142)
=202,514
P
Provisions relate to various pending unresolved claims and assessments over the Globe Group’s
mobile and wireline business. The information usually required by PAS 37, Provisions,
Contingent Liabilities and Contingent Assets, is not disclosed on the grounds that it can be
expected to prejudice the outcome of these claims and assessments. As of February 8, 2011,
the remaining pending claims and assessments are still being resolved.
The provisions for National Telecommunications Commission (NTC) permit fees amounting to
=
P117.26 million for an assessment by the NTC on March 27, 1996 and contested by Innove and
other members of the Telecommunications Operators of the Philippines was reversed in 2009 after
taking into account all available evidence including the merits of the ruling of the Court of
Appeals (CA) in favor of another telecommunications service provider.
*SGVMC114676*
- 51 -
14. Notes Payable and Long-term Debt
Notes payable consist of short-term promissory notes from local banks for working capital
requirements amounting to =
P2,000.83 million and P
=4,002.16 million as of December 31, 2009 and
2008, respectively. These notes bear interest ranging from 4.35% to 10.00%, and 8.38% to
10.00% per annum in 2009 and 2008, respectively. There are no outstanding notes payable as of
December 31, 2010.
Long-term debt consists of:
2010
Banks:
Local
Foreign
Corporate notes
Retail bonds
P
=20,352,194
7,317,483
17,729,939
4,971,854
50,371,470
8,677,209
P
=41,694,261
Less current portion
2009
(In Thousand Pesos)
=15,933,027
P
6,810,357
17,775,866
4,956,772
45,476,022
5,667,965
=39,808,057
P
2008
=15,160,390
P
4,836,265
13,846,398
2,742,885
36,585,938
7,742,227
=28,843,711
P
The maturities of long-term debt at nominal values excluding unamortized debt issuance costs as
of December 31, 2010 follow (in thousand pesos):
Due in:
2011
2012
2013
2014
2015 and thereafter
P8,725,621
=
12,410,350
9,770,085
9,761,586
9,983,065
=50,650,707
P
Unamortized debt issuance costs included in the above long-term debt as of December 31, 2010,
2009 and 2008 amounted to =
P279.24 million, P
=197.99 million and P
=84.67 million, respectively.
The interest rates and maturities of the above debt are as follows:
Maturities
Interest Rates
2011-2015
2.26% to 7.03% in 2010
5.12% to 7.87% in 2009
5.21% to 9.11% in 2008
Foreign
2011-2016
0.74% to 4.13% in 2010
0.74% to 6.44% in 2009
3.14% to 6.44% in 2008
Corporate notes
2011-2016
2.67% to 8.38% in 2010
5.62% to 8.80% in 2009
5.77% to 13.79% in 2008
Retail bonds
2012-2014
7.50% to 8.00% in 2010
7.50% to 8.00% in 2009
5.49% to 11.70% in 2008
Banks:
Local
*SGVMC114676*
- 52 -
14.1 Bank Loans and Corporate Notes
Globe Telecom’s unsecured bank loans and corporate notes, which consist of fixed and
floating rate notes and peso-denominated bank loans, bear interest at stipulated and
prevailing market rates.
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 long-term
indebtedness or guarantees and creation of property encumbrances.
As of February 8, 2011, the Globe Group is not in breach of any loan covenants.
14.2 Retail Bonds
On February 25, 2009, Globe Group issued =
P5,000.00 million fixed rate bonds. This
amount comprises P
=1,974.00 million and P
=3,026.00 million fixed rate bonds due in 2012
and 2014, respectively, with interest of 7.50% and 8.00%, respectively. The proceeds of the
retail bonds will be used to fund Globe Group’s various capital expenditures.
The five-year retail bonds may be redeemed in whole, but not in part, on the twelfth (12th)
interest payment date at a price equal to 102.00% of the principal amount of the bonds and
all accrued interest to the date of redemption. Globe Group may not redeem the retail bonds
unless allowed under conditions specified in the agreements with respect to redemption for
tax reasons, purchase and cancellation and change in law or circumstance.
The Globe Group has to meet certain bond covenants including a maximum debt-to-equity
ratio of 2 to 1. As of February 8, 2011, the Globe Group is not in breach of any bond
covenants.
15. Other Long-term Liabilities
This account consists of:
Notes
ARO
Accrued lease obligations and others
Noninterest bearing liabilities
Advance lease
Less current portion
25.1
25.4
25.4
2010
P
=1,341,526
640,927
–
–
1,982,453
–
P
=1,982,453
2009
2008
(In Thousand Pesos)
=1,269,291
P
P1,081,408
=
647,416
591,642
735,944
821,805
67,673
79,929
2,720,324
2,574,784
803,617
99,145
=1,916,707
P
=2,475,639
P
The maturities of other long-term liabilities at nominal amounts as of December 31, 2010 follow
(in thousand pesos):
Due in:
2011
2012 and thereafter
=–
P
1,982,453
=1,982,453
P
*SGVMC114676*
- 53 In 2008, Globe Group updated its assumptions on the timing of settlement and estimated cash
outflows arising from ARO on its leased premises. As a result of the changes in estimates
reckoned as of January 1, 2008, Globe Group adjusted downward its ARO liability by
=714.78 million against the book value of the assets on leased premises.
P
The rollforward analysis of the Globe Group’s ARO follows:
Notes
At beginning of year
Capitalized to property and equipment
during the year - net of reversal
Accretion expense during the year
Adjustments due to changes in estimates
At end of year
2010
P
=1,269,291
30
22
41,473
95,207
(64,445)
P
=1,341,526
2009
2008
(In Thousand Pesos)
=1,081,408
P
=1,623,830
P
96,959
98,117
(7,193)
=1,269,291
P
95,086
77,269
(714,777)
=1,081,408
P
16. Related Party Transactions
Globe Telecom and Innove, in their regular conduct of business, enter into transactions with their
major stockholders, AC and STI, joints ventures and certain related parties. These transactions,
which are accounted for at market prices normally charged to unaffiliated customers for similar
goods and services, include the following:
16.1
Entities with joint control over Globe Group
· Globe Telecom has interconnection agreements with STI. The related net traffic
settlements receivable (included in “Receivables” account in the consolidated
statements of financial position) and the interconnection revenues earned (included in
“Service revenues” account in the consolidated statements of comprehensive income)
are as follows:
2010
Traffic settlements receivable - net
Interconnection revenues
·
P
=124,319
1,857,336
2009
(In Thousand Pesos)
=34,487
P
2,097,734
2008
=216,348
P
1,817,912
Globe Telecom and STI have a technical assistance agreement whereby STI will
provide consultancy and advisory services, including those with respect to the
construction and operation of Globe Telecom’s networks and communication services
(see Note 25.6), equipment procurement and personnel services. In addition, Globe
Telecom has software development, supply, license and support arrangements, lease of
cable facilities, maintenance and restoration costs and other transactions with STI.
*SGVMC114676*
- 54 The details of fees (included in repairs and maintenance under the “General, selling and
administrative expenses” account in the consolidated statements of comprehensive
income) incurred under these agreements are as follows:
2010
Technical assistance fee
Maintenance and restoration costs and
other transactions
Software development, supply, license
and support
P
=149,662
2009
(In Thousand Pesos)
=99,903
P
2008
=83,514
P
86,901
216,701
216,813
26,904
26,924
2,637
The net outstanding balances due to STI (included in the “Accounts payable and
accrued expenses” account in the consolidated statements of financial position) arising
from these transactions are as follows:
2009
(In Thousand Pesos)
=24,180
P
=23,838
P
26,640
45,734
28,569
28,818
33,555
115,243
2010
Technical assistance fee
Software development, supply, license
and support
Maintenance and restoration costs and
other transactions
·
P
=48,870
Globe Telecom earns subscriber revenues from AC. The outstanding subscribers
receivable from AC (included in “Receivables” account in the consolidated statements
of financial position) and the amount earned as service revenue (included in the
“Service revenues” account in the consolidated statements of comprehensive income)
are as follows:
2010
Subscriber receivables
Service revenues
·
2008
= 920
P
5,696
2009
2008
(In Thousand Pesos)
=103
P
=173
P
4,034
5,235
Globe Telecom reimburses AC for certain operating expenses. The net outstanding
liabilities to AC related to these transactions amounted to P
=31.34 million and
=
P23.68 million as of December 31, 2009 and 2008, respectively. There is no
outstanding liability as of December 31, 2010. Balances related to these transactions
(included in “General, selling and administrative expenses” account in the consolidated
statements of comprehensive income) amounted to =
P26.85 million, =
P21.12 million and
=
P70.76 million, as of December 31, 2010, 2009 and 2008, respectively.
*SGVMC114676*
- 55 16.2 Joint Ventures in which the Globe Group is a venturer
· Globe Telecom has preferred roaming service contract with BMPL. Under this
contract, Globe Telecom will pay BMPL for services rendered by the latter which
include, among others, coordination and facilitation of preferred roaming arrangement
among JV partners, and procurement and maintenance of telecommunications
equipment necessary for delivery of seamless roaming experience to customers. Globe
Telecom also earns or incurs commission from BMPL for regional top-up service
provided by the JV partners. The net outstanding liabilities to BMPL related to these
transactions amounted to P
=2.89 million and P
=1.02 million and P
=2.12 million as of
December 31, 2010, 2009 and 2008 respectively. Balances related to these transactions
(included in “General, selling and administrative expenses” account in the consolidated
statements of comprehensive income) amounted to =
P12.07 million, P
=23.98 million and
=9.69 million, as of December 31, 2010, 2009 and 2008, respectively.
P
· On October 2009, the Globe Group entered into an agreement with BPI Globe BanKO
for the pursuit of services that will expand the usage of GCash technology. As a result,
the Globe Group recognized revenue amounting to P
=9.99 million in 2009. The related
receivables amounted to =
P9.19 million and P
=11.19 million in 2010 and 2009,
respectively.
16.3 Transactions with the retirement fund (see Note 11)
· On February 1, 2009, the Globe Group entered into a memorandum of agreement
(MOA) with BEAM for the latter to render mobile television broadcast service to Globe
subscribers using the mobile TV service. As a result, the Globe Group recognized an
expense (included in “Professional and other contracted services”) amounting to
=250.00 million and P
P
=245.58 million in 2010 and 2009, respectively.
· On October 1, 2009, the Globe Group entered into a MOA with Altimax Broadcasting
Co., Inc. (Altimax), a subsidiary of BHI, for the Globe Group’s co-use of specific
frequencies of Altimax’s for the rollout of broadband wireless access to the Globe
Group’s subscribers. As a result, the Globe Group recognized an expense (included in
“General, selling and administrative Expenses” account in the consolidated statements
of comprehensive income) amounting to P
=90.00 million and P
=70.00 million in 2010 and
2009, respectively.
16.4 Transactions with other related parties
Globe Telecom has subscriber receivables (included in “Receivables” account in the
consolidated statements of financial position) and earns service revenues (included in the
“Service revenues” account in the consolidated statements of comprehensive income) from
its other related parties namely, Ayala Land Inc., Ayala Property Management Corporation,
BPI, Manila Water Company, Inc., Integrated Microelectronics, Inc., eTelecare Global
Solutions, Inc., HR Mall Incorporated, Honda Cars, Inc. and Isuzu Automotive Dealership,
Inc. These amounted to:
2010
Subscriber receivables
Service revenues
P
=158,275
245,490
2009
2008
(In Thousand Pesos)
=99,689
P
=99,769
P
149,232
203,586
*SGVMC114676*
- 56 The total expenses incurred on leases, utilities, customer contact services, other
miscellaneous services and purchase of vehicles provided to the Globe Group by these
other related parties included under “General, selling and administrative expenses” account
in the consolidated statements of comprehensive income amounted to P
=270.82 million,
=282.06 million and P
P
=248.89 million as of December 31, 2010, 2009 and 2008,
respectively, and “Property and equipment” in the consolidated statements of financial
position amounted to =
P78.32 million, =
P55.99 million and =
P114.22 million as of
December 31, 2010, 2009 and 2008, respectively. The outstanding balances due related to
these expenses amounted toP
=21.50 million, =
P14.91 million and P
=5.72 million as of
December 31, 2010, 2009 and 2008, respectively.
These related parties are either controlled or significantly influenced by AC.
16.5 Transactions with key management personnel of the Globe Group
The Globe Group’s compensation of key management personnel by benefit type are as
follows:
Notes
2010
21
18
18
P
=1,948,311
104,788
132,406
P
=2,185,505
Short-term employee benefits
Share-based payments
Post-employment benefits
2009
2008
(In Thousand Pesos)
=1,867,128
P
P1,833,508
=
126,437
182,324
53,290
112,620
=2,046,855
P
=2,128,452
P
There are no agreements between the Globe Group and any of its directors and key officers
providing for benefits upon termination of employment, except for such benefits to which
they may be entitled under the Globe Group’s retirement plans.
The Globe Group granted short-term loans to its key management personnel amounting to
=30.66 million, P
P
=33.37 million and P
=21.32 million in 2010, 2009 and 2008, respectively,
included in the “Prepayments and other current assets” in the consolidated statements of
financial position.
The summary of consolidated outstanding balances resulting from transactions with related
parties follows:
Notes
Subscriber receivables (included in
“Receivables” account)
Traffic settlements receivable - net
(included in “Receivables”
account)
Other current assets
Accounts payable and accrued
expenses
2010
2009
(In Thousand Pesos)
2008
P
=168,381
=110,978
P
=99,942
P
4
6
124,319
5,461
34,487
1,475
216,348
2,602
12
128,719
150,747
199,172
In May 2008, the NTC approved the assignment of Innove’s prepaid consumer subscriber
contracts in favor of Globe Telecom. The transfer did not result in the recognition of a gain or
loss in the consolidated financial statements.
*SGVMC114676*
- 57 -
17. Equity and Other Comprehensive Income
Globe Telecom’s authorized capital stock consists of:
Shares
Preferred stock - Series “A” =5 per share
P
Common stock - P
=50 per share
2009
2008
2010
Shares
Amount
Shares
Amount
Amount
(In Thousand Pesos and Number of Shares)
250,000
179,934
P
=1,250,000
8,996,719
250,000
179,934
P1,250,000
=
8,996,719
250,000
179,934
P1,250,000
=
8,996,719
Globe Telecom’s issued and subscribed capital stock consists of:
2009
2008
2010
Shares
Amount
Shares
Amount
Amount
(In Thousand Pesos and Number of Shares)
158,515
=792,575
P
158,515
=792,575
P
158,515
P
=792,575
132,346
6,617,280
132,340
6,617,008
132,348
6,617,424
7,409,855
7,409,583
7,409,999
–
(776)
–
(1,508)
–
(776)
=7,409,079
P
=7,408,075
P
P
=7,409,223
Shares
Preferred stock
Common stock
Total shares issued and fully paid
Less subscriptions receivable
17.1
Preferred Stock
Preferred stock - Series “A” has the following features:
(a) Convertible to one common share after 10 years from issue date on June 29, 2001 at
not less than the prevailing market price of the common stock less the par value of the
preferred shares;
(b) Cumulative and nonparticipating;
(c) Floating rate dividend;
(d) Issued at P
=5 par;
(e) With voting rights;
(f) Globe Telecom has the right to redeem the preferred shares at par plus accrued
dividends at any time after 5 years from date of issuance; and
(g) Preferences as to dividend in the event of liquidation.
The dividends for preferred shares are declared upon the sole discretion of the Globe
Telecom’s BOD. As of December 31, 2010, the Globe Group has dividends in arrears to
its preferred stockholders amounting to P
=45.40 million.
17.2
Common Stock
The rollforward of outstanding common shares are as follows:
Shares
At beginning of year
Exercise of stock options
At end of year
132,346
2
132,348
2009
2008
2010
Shares
Amount
Shares
Amount
Amount
(In Thousand Pesos and Number of Shares)
P
=6,617,280
144
P
=6,617,424
132,340
6
132,346
=6,617,008
P
272
=6,617,280
P
132,334
6
132,340
=6,616,677
P
331
=6,617,008
P
*SGVMC114676*
- 58 17.3
Cash Dividends
Information on Globe Telecom’s declaration of cash dividends follows:
Per share
Date
Amount
Record
Payable
(In Thousand Pesos, Except Per Share Figures)
Preferred stock dividends declared on:
December 2, 2008
December 4, 2009
P0.38
=
0.32
P60,637
=
50,492
Common stock dividends declared on:
February 4, 2008
August 5, 2008
February 3, 2009
August 4, 2009
November 6, 2009
February 4, 2010
August 3, 2010
P37.50
=
87.50
32.00
32.00
50.00
40.00
40.00
P4,962,508
=
11,579,763
4,234,885
4,234,979
6,617,280
5,293,926
5,293,939
December 18, 2008 March 17, 2009
December 18, 2009 March 18, 2010
February 18, 2008
August 21, 2008
February 17, 2009
August 19, 2009
November 20, 2009
February 19, 2010
August 17, 2010
March 13, 2008
September 15, 2008
March 10, 2009
September 15, 2009
December 15, 2009
March 15, 2010
September 13, 2010
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. The dividend payout rate starting 2006 is approximately 75% of prior year’s net
income payable semi-annually 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 August 5, 2008, the BOD approved the declaration of the second semi-annual cash
dividends in 2008 of =
P4,962.61 million (P
=37.50 per common share) and additional special
dividend of =
P6,616.81 million (P
=50.00 per common share) to common stockholders of
record as of August 21, 2008 and payable on September 15, 2008.
On November 6, 2009, the BOD amended the dividend payment rate from 75% to a range
of 75% - 90% and declared a special dividend of P
=50.00 per common share based on
shareholders on record as of November 20, 2009 with the payment date of
December 15, 2009.
On February 4, 2010, the BOD approved the declaration of the first semi-annual cash
dividend in 2010 of =
P5,293.93 million (P
=40.00 per common share) and additional special
dividend of =
P5,293.93 million (P
=40.00 per common share) to common stockholders of
record as August 17, 2010 and payable on September 13, 2010.
Cash Dividends after the End of Reporting Period
On February 8, 2011, the BOD approved the declaration of the first semi-annual cash
dividend of =
P31.00 per common share, payable to common stockholders of record as of
February 22, 2011. Total dividends amounting to =
P4,102.80 million will be payable on
March 18, 2011.
The BOD also approved the declaration of the cash dividend on preferred shares
amounting to P
=0.29 per preferred share, payable to preferred stockholder of record as of
February 22, 2011. Total dividends amounting to =
P45.40 million will be payable on
March 18, 2011.
*SGVMC114676*
- 59 17.4
Retained Earnings Available for Dividend Declaration
The total unrestricted retained earnings available for dividend declaration amounted to
=8,510.85 million as of December 31, 2010. This amount excludes the undistributed net
P
earnings of consolidated subsidiaries, accumulated equity in net earnings of joint ventures
accounted for under the equity method, and unrealized gains recognized on asset and
liability currency translations and unrealized gains on fair value adjustments. The Globe
Group is also subject to loan covenants that restrict its ability to pay dividends
(see Note 14).
17.5
Other Comprehensive Income
Other Reserves
Cash flow hedges
AFS financial
assets
Exchange
differences arising
from translations of
foreign investments
Total
For the Year Ended December 31, 2010 (In Thousand Pesos)
As of January 1, 2010
Fair value changes
Transferred to income and
expenses
Tax effect of items taken directly
to or transferred from equity
Exchange differences
As of December 31, 2010
(P
= 22,554)
(116,679)
P14,882
=
20,150
= 26,190
P
–
P18,518
=
(96,529)
(16,578)
–
–
(16,578)
39,977
–
(P
= 115,834)
–
–
= 35,032
P
–
(33,698)
(P
= 7,508)
39,977
(33,698)
(P
= 88,310)
For the Year Ended December 31, 2009 (In Thousand Pesos)
As of January 1, 2009
Fair value changes
Transferred to income and
expenses
Tax effect of items taken directly
to or transferred from equity
Exchange differences
As of December 31, 2009
(P
=37,219)
(35,116)
As of January 1, 2008
Fair value changes
Transferred to income and
expenses
Tax effect of items taken directly
to or transferred from equity
Exchange differences
As of December 31, 2008
P164,345
=
(457,080)
60,156
(10,375)
–
(P
=22,554)
=329
P
14,553
=1,508
P
–
–
–
–
–
=14,882
P
–
24,682
=26,190
P
(P
=35,382)
(20,563)
60,156
(10,375)
24,682
=18,518
P
For the Year Ended December 31, 2008 (In Thousand Pesos)
146,981
108,535
–
(P
=37,219)
P20,063
=
(19,734)
=–
P
–
P184,408
=
(476,814)
–
–
146,981
–
–
=329
P
–
1,508
=1,508
P
108,535
1,508
(P
=35,382)
*SGVMC114676*
- 60 -
18. Employee Benefits
18.1
Stock Option Plans
The Globe Group has a share-based compensation plan called the Executive Stock Option
Plan (ESOP). The number of shares allocated under the ESOP shall not exceed the
aggregate equivalent of 6% of the authorized capital stock.
On October 1, 2009, the Globe Group granted additional stock options to key executives
and senior management personnel under the ESOP. The grant requires the grantees to
pay a nonrefundable option purchase price of =
P1,000.00 until October 30, 2009, which is
the closing date for the acceptance of the offer. In order to avail of the privilege, the
grantees must remain with Globe Telecom or its affiliates from grant date up to the
beginning of the exercise period of the corresponding shares.
The following are the stock option grants to key executives and senior management
personnel of the Globe Group under the ESOP from 2003 to 2010:
Date of Grant
April 4, 2003
Number of
Options
Granted
680,200
Fair Value
of each
Option
=283.11
P
Exercise Price
=547.00 per share
P
Exercise Dates
50% of options exercisable from
April 4, 2005 to April 14, 2013; the
remaining 50% exercisable from
April 4, 2006 to April 14, 2013
July 1, 2004
803,800
=840.75 per share
P
50% of options exercisable from
July 1, 2006 to June 30, 2014; the
remaining 50% from July 1, 2007 to
June 30, 2014
=357.94
P
Black-Scholes
option pricing
model
March 24, 2006
749,500
=854.75 per share
P
50% of the options become
exercisable from March 24, 2008 to
March 23, 2016; the remaining 50%
become exercisable from March 24,
2009 to March 23, 2016
=292.12
P
Trinomial option
pricing model
May 17, 2007
604,000
=1,270.50 per share
P
50% of the options become
exercisable from May 17, 2009 to
May 16, 2017, the remaining 50%
become exercisable from May 17,
2010 to May 16, 2017
=375.89
P
Trinomial option
pricing model
August 1, 2008
635,750
=1,064.00 per share
P
50% of the options become
exercisable from August 1, 2010 to
July 31, 2018, the remaining 50%
become exercisable from August 1,
2011 to July 31, 2018
=305.03
P
Trinomial option
pricing model
October 1, 2009
298,950
=993.75 per share
P
50% of the options become
exercisable from October 1, 2011
to September 30, 2019, the
remaining 50% become exercisable
from October 1, 2012 to
September 30, 2019
=346.79
P
Trinomial option
pricing model
Fair Value
Measurement
Black-Scholes
option pricing
model
The exercise price is based on the average quoted market price for the last 20 trading days
preceding the approval date of the stock option grant.
*SGVMC114676*
- 61 A summary of the Globe Group’s ESOP activity and related information follows:
2010
Number of
Shares
Outstanding, at beginning of year
Granted
Exercised
Expired/forfeited
Outstanding, at end of year
Exercisable, at end of year
2,038,106
–
(34,900)
(155,125)
1,848,081
1,267,506
2009
2008
Weighted
Weighted
Weighted
Average
Average
Average
Number of
Exercise
Number of
Exercise
Exercise
Shares
Price
Shares
Price
Price
(In Thousands and Per Share Figures)
1,929,732 P
=1,035.76
1,617,114
=994.57
P
= 1,041.62
P
298,950
993.75
650,450
1,052.32
–
(137,626)
843.22
(247,332)
846.80
817.79
(52,950) 1,073.58
(90,500)
935.02
1,018.39
2,038,106 P
=1,041.62
1,929,732 P
=1,035.76
= 1,047.80
P
828,281
=962.78
P
363,032
=792.12
P
= 1,055.41
P
The average share prices at dates of exercise of stock options as of December 31, 2010,
2009 and 2008 amounted to =
P948.65, P
=975.26 and P
=1,461.82, respectively.
As of December 31, 2010, 2009 and 2008, the weighted average remaining contractual life
of options outstanding is 6.65 years, 7.59 years, and 8.13 years, respectively.
The following assumptions were used to determine the fair value of the stock options at
effective grant dates:
October 1, 2009 August 1, 2008
May 17, 2007 March 24, 2006
July 1, 2004 April 4, 2003
Share price
=995.00
P
=1,130.00
P
=1,340.00
P
=930.00
P
=835.00
P
=580.00
P
Exercise price
=993.75
P
=1,064.00
P
=1,270.50
P
=854.75
P
=840.75
P
=547.00
P
Expected volatility
48.49%
31.73%
38.14%
29.51%
39.50%
34.64%
Option life
10 years
10 years
10 years
10 years
10 years
10 years
Expected dividends
6.43%
6.64%
4.93%
5.38%
4.31%
2.70%
Risk-free interest rate
8.08%
9.62%
7.04%
10.30%
12.91%
11.46%
The expected volatility measured at the standard deviation of expected share price returns
was based on analysis of share prices for the past 365 days.
Cost of share-based payments for the years ended December 31, 2010, 2009 and 2008
amounted to =
P104.79 million, P
=126.44 million and P
=182.32 million, respectively.
18.2
Pension Plan
The Globe Group has a funded, noncontributory, defined benefit pension plan covering
substantially all of its regular employees. The benefits are based on years of service and
compensation on the last year of employment.
The components of pension expense (included in staff costs under “General, selling and
administrative expenses”) in the consolidated statements of comprehensive income are as
follows:
Pension expense
2010
Current service cost
Interest cost on benefit obligation
Expected return on plan assets
Net actuarial losses
Total pension expense
Actual return (loss) on plan assets
P
=245,766
181,638
(232,747)
47,110
P
=241,767
P
=234,071
2009
2008
(In Thousand Pesos)
=163,382
P
=221,289
P
156,182
136,160
(234,018)
(138,301)
(41)
28,314
=85,505
P
=247,462
P
=181,051
P
(P
=184,599)
*SGVMC114676*
- 62 The funded status for the pension plan of Globe Group is as follows:
2010
Benefit obligation
Plan assets
Unrecognized net actuarial losses
Asset recognized in the consolidated statements
of financial position*
P
=2,186,228
(2,355,730)
(169,502)
(781,014)
(P
= 950,516)
2009
2008
(In Thousand Pesos)
=2,079,316
P
P1,319,742
=
(2,334,772)
(2,344,764)
(255,456)
(1,025,022)
(799,539)
(115,403)
(P
=1,054,995)
(P
=1,140,425)
*Of this amount, =
P951.08 million is included in “Other noncurrent assets” account, while the P
=0.57 million is
included in “Accrued expenses” under “Accounts payable and accrued expenses” account as of December 31, 2010.
The following tables present the changes in the present value of defined benefit obligation
and fair value of plan assets:
Present value of defined benefit obligation
2010
Balance at beginning of year
Interest cost
Current service cost
Benefits paid
Actuarial losses (gains)
Balance at end of year
P
=2,079,316
181,638
245,766
(167,620)
(152,872)
P
=2,186,228
2009
2008
(In Thousand Pesos)
=1,319,742
P
P1,690,615
=
156,182
136,160
163,382
221,289
(129,761)
(87,941)
569,771
(640,381)
=2,079,316
P
=1,319,742
P
Fair value of plan assets
2010
Balance at beginning of year
Expected return
Contributions
Benefits paid
Actuarial losses
Balance at end of year
P
=2,334,772
232,747
137,287
(167,620)
(181,456)
P
=2,355,730
2009
2008
(In Thousand Pesos)
=2,344,764
P
P1,341,568
=
234,018
138,301
104
1,225,345
(129,761)
(87,941)
(114,353)
(272,509)
=2,334,772
P
=2,344,764
P
The recommended contribution for the Globe Group retirement fund for the year 2011
amounted to =
P119.52 million. This amount is based on the Globe Group’s actuarial
valuation report as of December 31, 2010.
As of December 31, 2010, 2009 and 2008, the allocation of the fair value of the plan
assets of the Globe Group follows:
2010
Investments in fixed income securities:
Corporate
Government
Investments in equity securities
Others
12.66%
20.96%
63.89%
2.49%
2009
2008
12.40%
18.71%
66.81%
2.08%
21.02%
12.80%
64.12%
2.06%
*SGVMC114676*
- 63 In 2008, Globe, Innove and GXI pooled its plan assets for single administration by the
fund managers. The EGG Group’s retirement fund is being managed separately and the
amount of defined benefit obligation is immaterial.
As of December 31, 2010, the pension plan assets of the Globe Group include shares of
stock of Globe Telecom with total fair value of =
P14.79 million, and shares of stock of
other related parties with total fair value of P
=52.90 million.
The assumptions used to determine pension benefits of Globe Group are as follows:
2009
9.00%
10.00%
7.00%
2010
8.50%
10.00%
6.00%
Discount rate
Expected rate of return on plan assets
Salary rate increase
2008
12.33%
10.00%
7.00%
In 2010, 2009 and 2008, the Globe Group applied a single weighted average discount rate
that reflects the estimated timing and amount of benefit payments and the currency in
which the benefits are to be paid.
The overall expected rate of return on plan assets is determined based on the market prices
prevailing on that date, applicable to the period over which the obligation is to be settled.
Amounts for the current and previous four years are as follows:
2010
Defined benefit obligation
Plan assets
Deficit (surplus)
P
=2,186,228
2,355,730
(169,502)
2009
2008
(In Thousand Pesos)
=2,079,316
P
=1,319,742
P
2,334,772
2,344,764
(255,456)
(1,025,022)
2007
2006
P1,690,615
=
1,341,568
349,047
P1,267,209
=
1,254,906
12,303
2009
2010
(In Thousand Pesos)
Experience adjustments:
Gain (loss) on plan liabilities
Gain (loss) on plan assets
(P
=23,901)
(181,456)
=18,390
P
(114,327)
2008
(P
=51,340)
(272,539)
2007
(P
=170,819)
29,780
19. Interest Income
Interest income is earned from the following sources:
2010
Short-term placements
Cash in banks
Others
P
=90,889
23,121
104,522
P
=218,532
2009
(In Thousand Pesos)
=145,623
P
67,288
58,895
=271,806
P
2008
=394,824
P
23,033
2,568
=420,425
P
The “Others” account pertains to interest income from loans receivables from BHI and Globe
Telecom retirement fund (see Note 11).
*SGVMC114676*
- 64 20. Other Income
This account consists of:
Foreign exchange gain - net
Lease income
Others
Notes
2010
22, 28.2.1.2
8, 25.1.b
P
=465,373
173,261
218,307
P
=856,941
2009
(In Thousand Pesos)
=286,530
P
204,505
573,441
=1,064,476
P
2008
=–
P
210,003
490,871
=700,874
P
The peso to US dollar exchange rates amounted to P
=43.811, P
=46.425 and P
=47.655 as of
December 31, 2010, 2009 and 2008, respectively.
The Globe Group’s net foreign currency-denominated liabilities amounted to USD267.77 million,
USD207.18 million and USD85.37 million as of December 31, 2010, 2009 and 2008, respectively
(see Note 28.2.1.2).
These combinations of net liability movements and peso rate depreciation/appreciation resulted in
foreign exchange gains in 2010 and 2009 and loss in 2008 (see Note 22).
The “Others” account includes actual recoveries of operating losses recognized in previous years.
21. General, Selling and Administrative Expenses
This account consists of:
Notes
2010
Staff costs
16.5, 18
Selling, advertising and promotions
Professional and other contracted services
16
Utilities, supplies and other administrative
expenses
5
Repairs and maintenance
16
Rent
25
Insurance and security services
Taxes and licenses
Courier, delivery and miscellaneous
expenses
Others
P
=5,088,990
4,268,843
3,587,635
2009
2008
(In Thousand Pesos)
=4,980,769
P
=5,076,635
P
3,766,390
4,494,329
2,695,598
2,429,615
3,338,608
3,272,514
2,808,906
1,701,258
1,175,417
2,692,958
2,581,565
3,469,319
1,732,888
1,131,280
2,709,850
2,495,162
2,883,397
1,731,878
575,481
984,274
465,659
P
=26,692,104
906,451
539,664
=24,496,882
P
898,488
462,291
=23,757,126
P
The “Others” account includes miscellaneous expenses, delivery charges and various other items
that are individually immaterial.
*SGVMC114676*
- 65 22. Financing Costs
This account consists of:
Interest expense*
Swap and other financing costs - net
Loss (gain) on derivative instruments
Foreign exchange loss - net
Notes
2010
7
P
=1,981,785
58,321
28,295
–
P
=2,068,401
28
20, 28.2.1.2
2009
2008
(In Thousand Pesos)
=2,096,945
P
P2,255,878
=
38,993
(13,105)
46,943
(1,681)
–
759,299
=2,182,881
P
=3,000,391
P
*This account is net of capitalized expense and amortization of debt issuance costs.
In 2010 and 2009, net foreign exchange gain amounting to P
=465.37 million and P
=286.53 million,
respectively, was presented as part of “Others - net” account in the consolidated statements of
comprehensive income (see Note 20).
Interest expense - net is incurred on the following:
Long-term debt
Short term notes payable
Accretion expense
Notes
2010
14
14
15, 25.4
P
=1,768,861
39,237
173,687
P
=1,981,785
2009
2008
(In Thousand Pesos)
=1,751,423
P
P2,035,281
=
170,205
57,391
175,317
163,206
=2,096,945
P
=2,255,878
P
23. Impairment Losses and Others
This account consists of:
Notes
Impairment loss (reversal of impairment loss) on:
Receivables
Property and equipment
Provisions for (reversal of):
Inventory obsolescence and market decline
Other probable losses
2010
28.2.2 P
=1,285,533
83,040
5
13
42,115
138,760
P
=1,549,448
2009
(In Thousand Pesos)
=754,633
P
85,631
58,743
(88,047)
=810,960
P
2008
=979,779
P
(31,172)
262,103
(5,031)
=1,205,679
P
*SGVMC114676*
- 66 -
24. Income Tax
The significant components of the deferred income tax assets and liabilities of the Globe Group
represent the deferred income tax effects of the following:
2010
Deferred income tax assets on:
Unearned revenues already subjected to
income tax
Allowance for impairment losses on
receivables
ARO
Accrued rent expense under PAS 17
Accumulated impairment losses on property
and equipment
Accrued vacation leave
Provision for other probable losses
Unrealized loss on derivative transactions
Inventory obsolescence and market decline
NOLCO
Cost of share-based payments
MCIT
Unrealized foreign exchange losses
Others
Deferred income tax liabilities on:
Excess of accumulated depreciation and
amortization of Globe Telecom equipment
for tax reporting(a) over financial reporting(b)
Undepreciated capitalized borrowing costs
already claimed as deduction for tax
reporting
Unrealized foreign exchange gain
Unamortized discount on noninterest bearing
liability
Prepaid pension
Customer contracts of acquired company
Net deferred income tax liabilities
(a) Sum-of-the-years digit method
(b) Straight-line method
2009
(In Thousand Pesos)
2008
P
=744,504
=918,938
P
=1,003,875
P
737,311
374,106
120,753
400,352
346,668
130,805
369,120
317,732
122,030
98,389
84,168
73,592
67,793
43,265
13,499
5,819
954
125
–
2,364,278
88,808
76,402
33,097
16,845
87,311
138,054
23,555
46,711
21,202
–
2,328,748
67,195
52,095
27,928
4,993
94,045
–
7,796
–
21,607
235
2,088,651
4,799,099
5,116,298
5,342,712
1,166,689
279,037
839,330
160,761
591,238
92,504
39,718
23,059
6,572
6,314,174
P
=3,949,896
67,178
21,709
8,228
6,213,504
=3,884,756
P
108,041
12,349
8,514
6,155,358
=4,066,707
P
Net deferred tax assets and liabilities presented in the consolidated statements of financial position
on a net basis by entity are as follows:
2010
Net deferred tax assets (Innove and EGG Group)
Net deferred tax liabilities (Globe Telecom)
P
=670,594
4,620,490
2009
(In Thousand Pesos)
=742,538
P
4,627,294
2008
=523,722
P
4,590,429
*SGVMC114676*
- 67 GXI did not recognize its deferred income tax assets amounting to =
P64.53 million, P
=38.60 million
and P
=47.75 million as of December 31, 2010, 2009 and 2008, respectively, which includes
deferred income tax assets on NOLCO amounting to P
=58.54 million, =
P33.90 million and
=43.90 million as of December 31, 2010, 2009 and 2008, respectively, because the management
P
believes that there is no assurance that GXI will generate sufficient taxable income to allow all or
part of its deferred income tax assets to be utilized.
The details of Innove’s, GXI’s and EGG Group’s NOLCO and MCIT and the related tax effects
are as follows (in thousand pesos):
Inception Year
2010
2009
2008
MCIT
=322
P
48,236
238
=48,796
P
Tax Effect of
NOLCO
=38,987
P
127,726
29,365
=196,078
P
NOLCO
=129,956
P
425,753
97,884
=653,593
P
Expiry Year
2013
2012
2011
GXI’s NOLCO amounting to P
=47.82 million expired in 2010.
The reconciliation of the provision for income tax at statutory tax rate and the actual current and
deferred provision for income tax follows:
2010
Provision at statutory income tax rate
Add (deduct) tax effects of:
Deferred tax on unexercised stock options and
basis differences on deductible and reported
stock compensation expense
Tax rate difference arising from the change in
expected timing of deferred tax
assets’/liabilities’ reversal
Equity in net losses of joint ventures
Income subjected to lower tax rates
Others
Actual provision for income tax
P
=4,211,458
47,806
–
890
(51,205)
84,609
P
=4,293,558
2009
2008
(In Thousand Pesos)
=5,391,811
P
=6,246,107
P
15,405
–
2,103
(62,175)
56,685
=5,403,829
P
294,620
25,911
3,405
(77,364)
77,463
=6,570,142
P
The current provision for income tax includes the following:
2010
Regular corporate income tax
Final tax
P
=4,166,153
21,472
P
=4,187,625
2009
(In Thousand Pesos)
=5,543,242
P
40,567
=5,583,809
P
2008
=7,194,104
P
74,480
=7,268,584
P
The corporate tax rate is 30% in 2010 and 2009 and 35% in 2008.
Globe Telecom and Innove are entitled to certain tax and nontax incentives and have availed of
incentives for tax and duty-free importation of capital equipment for their services under their
respective franchises.
*SGVMC114676*
- 68 -
25. Agreements and Commitments
25.1
Lease Commitments
(a) Operating lease commitments - Globe Group as lessee
Globe Telecom and Innove lease certain premises for some of its telecommunications
facilities and equipment and for most of its business centers and network sites. The
operating lease agreements are for periods ranging from 1 to 10 years from the date of
the contracts and are renewable under certain terms and conditions. The agreements
generally require certain amounts of deposit and advance rentals, which are shown as
part of the “Other noncurrent assets” account in the consolidated statements of
financial position. The Globe Group also has short term renewable leases on
transmission cables and equipment. The Globe Group’s rentals incurred on these
various leases (included in “General, selling and administrative expenses” account in
the consolidated statements of comprehensive income) amounted to P
=2,808.91
million, =
P3,469.32 million and P
=2,883.40 million for the years ended December 31,
2010, 2009 and 2008, respectively (see Note 21).
As of December 31, 2010, the future minimum lease payments under these operating
leases are as follows (in thousand pesos):
Not later than one year
After one year but not more than five years
After five years
=2,002,201
P
7,431,735
2,363,687
=11,797,623
P
(b) Operating lease commitments - Globe Group as lessor
Globe Telecom and Innove have certain lease agreements on equipment and office
spaces. The operating lease agreements are for periods ranging from 1 to 14 years
from the date of contracts. These include Globe Telecom’s lease agreement with C2C
Pte. Ltd. (C2C) (see Note 25.4).
Total lease income amounted to P
=172.50 million, P
=171.48 million and
P198.10 million for the years ended December 31, 2010, 2009 and 2008, respectively.
=
The future minimum lease receivables under these operating leases are as follows
(in thousand pesos):
Within one year
After one year but not more than five years
After five years
=156,370
P
625,479
39,092
=820,941
P
*SGVMC114676*
- 69 (c) Finance lease commitments - Globe Group as lessee and lessor
Globe Telecom and Innove have entered into finance lease agreements for various
items of property and equipment. The said leased assets are capitalized and are
depreciated over the EUL of three years, which is also equivalent to the lease term.
As of December 31, 2010, 2009 and 2008, residual present value of net minimum
lease payments due and receivable are immaterial.
25.2
Agreements and Commitments with Other Carriers
Globe Telecom and Innove have existing international telecommunications service
agreements with various foreign administrations and interconnection agreements with
local telecommunications companies for their various services. Globe also has
international roaming agreements with other foreign operators, which allow its
subscribers access to foreign networks. The agreements provide for sharing of toll
revenues derived from the mutual use of telecommunication networks.
25.3
Arrangements and Commitments with Suppliers
Globe Telecom and Innove have entered into agreements with various suppliers for
the development or construction, delivery and installation of property and equipment.
Under the terms of these agreements, advance payments are made to suppliers and
delivery, installation, development or construction commences only when purchase
orders are served. While the development or construction is in progress, project costs
are accrued based on the billings received. Billings are based on the progress of the
development or construction and advance payments are being applied proportionately
to the milestone billings. When development or construction and installation are
completed and the property and equipment is ready for service, the balance of the
value of the related purchase orders is accrued. In 2009, the Globe Group reclassified
its Advances to Suppliers and Contractors to “Prepayments and other current assets”
based on agreed contract terms. The impact of the reclassification is an increase in
prepayment and other current assets by P
=1,143.89 million and =
P2,114.20 million as of
December 31, 2009 and 2008, respectively (see Note 6).
The consolidated accrued project costs as of December 31, 2010, 2009 and 2008
included in the “Accounts payable and accrued expenses” account in the consolidated
statements of financial position amounted to P
=8,638.12 million, P
=8,081.68 million and
=5,258.62 million, respectively (see Note 12). As of December 31, 2010, the
P
consolidated expected future billings on the unaccrued portion of purchase orders
issued amounted to =
P11,822.92 million. The settlement of these liabilities is
dependent on the payment terms and project milestones agreed with the suppliers and
contractors. As of December 31, 2010, the unapplied advances made to suppliers and
contractors relating to purchase orders issued amounted to =
P764.70 million
(see Note 6).
25.4
Agreements with C2C
In 2001, Globe Telecom signed a cable equipment supply agreement with C2C. In
March 2002, Globe Telecom entered into an equipment lease agreement for the said
equipment with GB21 Hong Kong Limited (GB21).
*SGVMC114676*
- 70 Subsequently, GB21, in consideration of C2C’s agreement to assume all payment
obligations pursuant to the lease agreement, assigned all its rights, obligations and
interest in the equipment lease agreement to C2C. As a result of the said assignment
of payables by GB21 to C2C, Globe Telecom’s liability arising from the cable
equipment supply agreement with C2C was effectively converted into a noninterest
bearing long-term obligation accounted for at net present value under PAS 39
starting 2005 with carrying values amounting to =
P642.31 million, P
=735.94 million and
=821.81 million as of December 31, 2010, 2009 and 2008, respectively (see Note 15).
P
In January 2003, Globe Telecom received advance lease payments from C2C for its
use of a portion of Globe Telecom’s cable landing station facilities. Accordingly,
based on the amortization schedule, Globe Telecom recognized lease income
amounting to P
=12.26 million, =
P12.26 million and =
P11.90 million for the years ended
December 31, 2010, 2009 and 2008, respectively.
The current and noncurrent portions of the said advances shown as part of the “Other
long-term liabilities” account in the consolidated statements of financial position are
as follows (see Note 15):
2010
Current
Noncurrent
P
=–
–
P
=–
2009
(In Thousand Pesos)
=67,673
P
–
=67,673
P
2008
P12,256
=
67,673
=79,929
P
On November 17, 2009, Globe Telecom and Pacnet Cable Ltd. (Pacnet), formerly
C2C, signed a memorandum of agreement (MOA) to terminate and unwind their
Landing Party Agreement dated August 15, 2000 (LPA). The MOA further requires
Globe Telecom, being duly licensed and authorized by the NTC to land the C2C
Cable Network in the Philippines and operate the C2C Cable Landing Station (CLS)
in Nasugbu, Batangas, Philippines, to transfer to Pacnet’s designated qualified
partner, the license of the C2C CLS, the CLS, a portion of the property on which the
CLS is situated, certain equipment and associated facilities thereof.
In return, Pacnet will compensate Globe Telecom in cash and by way of C2C cable
capacities deliverable upon completion of certain closing conditions. The MOA also
provided for novation of abovementioned equipment supply and lease agreements and
reciprocal options for Globe Telecom to purchase future capacities from Pacnet and
Pacnet to purchase backhaul and ducts from Globe Telecom at agreed prices.
In the second quarter of 2010, the specific equipment, portion of the property and
facilities and the liabilities associated with the transfer were identified and were
classified as current and shown separately in the consolidated statement of financial
position as “Assets classified as held for sale” and “Liabilities directly associated with
the assets classified as held for sale”.
The closing documents are expected to be fully executed within 2011.
*SGVMC114676*
- 71 As of December 31, 2010, assets classified as held for sale amounted to
=778.32 million. Liabilities directly associated with assets classified as held for sale
P
amounted to =
P697.73 million.
25.5
Agreement with BHI
On August 11, 2009, Globe Telecom signed a credit facility agreement with BHI
amounting to =
P750.00 million. The total drawdown under this loan made by BHI in
2009 amounted to =
P295.00 million. The loan is payable in one full payment, five
years from the date of initial drawdown with a prepayment option in whole or in part
on an interest payment date. Interest is at the rate of 8.275% payable semi-annually in
arrears and the loan is secured by a pledge and chattel mortgage agreement. As of
December 31, 2010, the undrawn balance of the credit facility is P
=455.00 million
(see Note 11).
25.6
Agreement with STI
In 2009, STI agreed to sell to Globe Telecom its own capacity in a certain cable
system. In 2009 also, Globe Telecom agreed to sell to STI capacities that it owns in a
certain cable system (see Note 16). Completion of the final agreement between
parties will happen in 2011.
25.7
Construction Maintenance Agreement for South-East Asia Japan Cable System (SJC)
Globe Telecom signed a Construction Maintenance Agreement with 5 other
international carriers to construct the SJC system, a 6-fiber pair, high capacity
submarine cable system that will link Singapore, Hong Kong, Indonesia, Philippines
and Japan. Globe Telecom’s estimated investment for this project amounts to
USD60.00 million and total expenditures incurred was at 15% as of
December 31, 2010.
25.8
Commitment to increase GXI’s paid-up capital
On May 5, 2009, the BOD of Globe Telecom approved the issuance of a guarantee to
the Bangko Sentral ng Pilipinas (BSP) for the proposal of GXI to increase its paid-up
capital to P
=100.00 million on a staggered basis over a period of two (2) years to meet
the required minimum capital and qualify as E-Money Issuer-Others in compliance
with BSP Circular No. 649. On August 27, 2009, the Monetary Board of the BSP
approved GXI’s compliance with this circular under Resolution No. 1223.
On August 3, 2010, the BOD of Globe Telecom approved the transfer of GXI’s
related assets booked under Globe Telecom to GXI books in compliance with BSP’s
first tranche requirement to increase GXI’s paid up capital to at least P
=50.00 million
by 2010. Globe Telecom made the additional capital infusion to GXI through transfer
of assets and GXI recorded the assets at its fair value amount of P
=53.69 million
increasing its total paid-up capital to P
=82.69 million as of September 30, 2010. After
consolidation, where the additional infusion and transfer of assets are eliminated, the
assets remain under Globe Telecom at its net book value amount of =
P20.38 million.
*SGVMC114676*
- 72 -
26. Contingencies
On July 23, 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.
On December 28, 2010, the CA rendered its decision declaring null and void and reversing the
decisions of the NTC in the rates applications cases for having been issued in violation of Globe
and the other carrier’s constitutional and statutory right to due process. However, while the
decision is in Globe’s favor, there is a provision in the decision that NTC did not violate the right
of petitioners to due process when it declared via circular that the per pulse billing scheme shall be
the default.
Last January 21, 2011, Globe and two other telecom carriers, filed their respective Motions for
Partial Reconsideration (MR) on the pronouncement that “the Per Pulse Billing Scheme shall be
the default.” The MR is pending resolution as of February 8, 2011.
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 eventual liability under these claims, if any, will not have a material or
adverse effect on the Globe Group’s financial position and results of operations.
27. Earnings Per Share
The Globe Group’s earnings per share amounts were computed as follows:
2010
2009
2008
(In Thousand Pesos and Number of Shares,
Except Per Share Figures)
Net income attributable to common shareholders
for basic earnings per share
Add dividends on preferred shares
Net income attributable to shareholders for diluted
earnings per share
Weighted average number of shares for basic
earnings per share
Dilutive shares arising from:
Convertible preferred shares
Stock options
Adjusted weighted average number of common
stock for diluted earnings per share
Basic earnings per share
Diluted earnings per share
P
=9,744,634
–
=12,518,381
P
50,492
=11,215,241
P
60,637
9,744,634
12,568,873
11,275,878
132,343
132,342
132,337
42
890
66
867
262
674
133,275
P
=73.63
P
=73.12
133,275
=94.59
P
=94.31
P
133,273
=84.75
P
=84.61
P
*SGVMC114676*
- 73 28. Capital and Risk Management and Financial Instruments
28.1
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,
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.
The succeeding discussion focuses on Globe Group’s capital and financial risk
management.
28.2
Capital and Financial Risk Management Objectives and Policies
The primary objective of the Globe Group’s capital management is to ensure that it
maintains a strong credit rating and healthy capital ratios in order to support its business
and maximize shareholder value.
The Globe Group monitors its use of capital using leverage ratios, such as debt to total
capitalization and makes adjustments to it in light of changes in economic conditions and
its financial position.
The Globe Group is not subject to externally imposed capital requirements. The ratio of
debt to total capitalization for the years ended December 31, 2010, 2009 and 2008 was at
52%, 50% and 45%, respectively.
*SGVMC114676*
- 74 The main purpose of the Globe Group’s financial risk management is to fund its
operations and capital expenditures. The risks arising from the use of financial
instruments are market risk, credit risk and liquidity risk. Globe Telecom also enters into
derivative transactions, the purpose of which is to manage the currency and interest rate
risk arising from its financial instruments.
Globe Telecom’s BOD reviews and approves the policies for managing each of these
risks. The Globe Group monitors market price risk arising from all financial instruments
and regularly reports financial management activities and the results of these activities to
the BOD.
The Globe Group’s risk management policies are summarized below:
28.2.1 Market Risk
Market risk is the risk that the fair value of future cash flows of a financial
instrument will fluctuate because of changes in market prices. Globe Group is
mainly exposed to two types of market risk: interest rate risk and currency risk.
Financial instruments affected by market risk include loans and borrowings, AFS
investments, and derivative financial instruments.
The sensitivity analyses in the following sections relate to the position as at
December 31, 2010, 2009 and 2008. The analyses exclude the impact of
movements in market variables on the carrying value of pension and other postretirement obligations, provisions and on the non-financial assets and liabilities of
foreign operations.
The following assumptions have been made in calculating the sensitivity analyses:
·
·
·
The statement of financial position sensitivity relates to derivatives.
The sensitivity of the relevant income statement item is the effect of the
assumed changes in respective market risks. This is based on the financial
assets and financial liabilities held as at December 31, 2010, 2009 and 2008
including the effect of hedge accounting.
The sensitivity of equity is calculated by considering the effect of any
associated cash flow hedges for the effects of the assumed changes the
underlying.
28.2.1.1 Interest Rate Risk
The Globe Group’s exposure to market risk from changes in interest
rates relates primarily to the Globe Group’s long-term debt obligations.
Please refer to table presented under 28.2.3 Liquidity Risk.
Globe Group’s policy is to manage its interest cost using a mix of fixed
and variable rate debt, targeting a ratio of between 31-62% fixed rate
USD debt to total USD debt, and between 44-88% fixed rate PHP debt
to total PHP debt. To manage this mix in a cost-efficient manner, Globe
Group enters into interest rate swaps, in which Globe Group agrees to
exchange, at specified intervals, the difference between fixed and
variable interest amounts calculated by reference to an agreed-upon
notional principal amount.
*SGVMC114676*
- 75 After taking into account the effect of currency and interest rate swaps,
32% and 65% of the Globe Group’s USD and PHP borrowings,
respectively, as of December 31, 2010, 34% and 45% of the Globe
Group’s USD and PHP borrowings, respectively, as of December 31,
2009, 35% and 55% of the Globe Group’s USD and PHP borrowings,
respectively, as of December 31, 2008, are at a fixed rate of interest.
The following tables demonstrate the sensitivity of income before tax to
a reasonably possible change in interest rates after the impact of hedge
accounting, with all other variables held constant.
2010
Increase/decrease
in basis points
USD*
PHP
+35bps
-35bps
+100bps
-100bps
Effect on income
before tax
Effect on equity
Increase (decrease)
Increase (decrease)
(In Thousand Pesos)
(P
=14,607)
P
=7,086
14,622
(7,009)
(134,008)
153,121
133,980
(160,664)
*The Globe Group revised the USD interest rates to a more reasonable estimate due to declining
USD LIBOR rates
2009
Increase/decrease
in basis points
USD
PHP
+200bps
-200bps
+100bps
-100bps
Effect on income
before tax
Effect on equity
Increase (decrease)
Increase (decrease)
(In Thousand Pesos)
(P
=31,983)
=38,989
P
29,784
(17,214)
(121,820)
–
121,747
–
2008
Increase/decrease
in basis points
USD
PHP
+200 bps
-200 bps
+100 bps
-100 bps
Effect on income
before tax
Effect on equity
Increase (decrease)
Increase (decrease)
(In Thousand Pesos)
(P
=29,780)
=27,412
P
30,815
(28,606)
(63,938)
(1,790)
63,840
1,818
The impact to equity is caused by the change in marked to market value
of derivatives classified as hedges.
28.2.1.2 Foreign Exchange Risk
The Globe Group’s foreign exchange risk results primarily from
movements of the PHP against the USD with respect to USDdenominated financial assets, USD-denominated financial liabilities and
certain USD-denominated revenues. Majority of revenues are generated
in PHP, while substantially all of capital expenditures are in USD. In
addition, 15%, 14% and 12% of debt as of December 31, 2010, 2009
and 2008, respectively, are denominated in USD before taking into
account any swap and hedges.
*SGVMC114676*
- 76 Information on the Globe Group’s foreign currency-denominated
monetary assets and liabilities and their PHP equivalents are as follows:
2010
2009
US
Peso
Dollar
Equivalent
(In Thousands)
2008
US
Dollar
Peso
Equivalent
=2,120,901
P
2,337,915
$40,776
68,004
=1,943,159
P
3,240,744
–
96,043
5
4,458,821
14
108,794
661
5,184,564
155,085
148,133
303,218
7,199,819
6,877,090
14,076,909
92,464
101,696
194,160
4,406,395
4,846,310
9,252,705
Net foreign currencydenominated liabilities
$207,175
$267,767 P
= 11,731,172
*This table excludes derivative transactions disclosed in Note 28.3
=9,618,088
P
$85,366
=4,068,141
P
Assets
Cash and cash equivalents
Receivables
Prepayments and other
current assets
Liabilities
Accounts payable and accrued
expenses
Long-term debt
US
Dollar
Peso
Equivalent
$41,573
58,257
= 1,821,337
P
2,552,308
$45,684
50,359
–
99,830
–
4,373,645
197,586
170,011
367,597
8,656,460
7,448,357
16,104,817
The following tables demonstrate the sensitivity to a reasonably possible
change in the PHP to USD exchange rate, with all other variables held
constant, of the Globe Group’s income before tax (due to changes in the
fair value of financial assets and liabilities).
2010
Increase/decrease
in Peso to
US Dollar exchange rate
+.40
-.40
Effect on income before tax
Effect on equity
Increase (decrease)
Increase (decrease)
(In Thousand Pesos)
(P
= 106,051)
(P
= 14,181)
106,051
14,181
2009
Increase/decrease
in Peso to
US Dollar exchange rate
+.40
-.40
Effect on income before tax
Effect on equity
Increase (decrease)
Increase (decrease)
(In Thousand Pesos)
(P
=81,857)
(P
=278)
81,857
278
2008
Increase/decrease
in Peso to
US Dollar exchange rate
+.40
-.40
Effect on income before tax
Effect on equity
Increase (decrease)
Increase (decrease)
(In Thousand Pesos)
(P
=37,971)
(P
=4,291)
37,971
4,291
*SGVMC114676*
- 77 The movement on the income before tax is a result of a change in the
fair value of derivative financial instruments not designated in a hedging
relationship and monetary assets and liabilities denominated in US
dollars, where the functional currency of the Group is Philippine Peso.
Although the derivatives have not been designated in a hedge
relationship, they act as economic hedge and will offset the underlying
transactions when they occur.
The movement in equity arises from changes in the fair values of
derivative financial instruments designated as cash flow hedges.
In addition, the consolidated expected future payments on foreign
currency-denominated purchase orders related to capital projects
amounted to USD274.51 million, USD255.79 million, and USD264.66
million as of December 31, 2010, 2009 and 2008, respectively. The
settlement of these liabilities is dependent on the achievement of project
milestones and payment terms agreed with the suppliers and contractors.
Foreign exchange exposure assuming a +/-40 centavos in 2010, 2009
and 2008 movement in PHP to USD rate on commitments amounted to
=109.80 million, P
P
=102.32 million and P
=105.86 million gain or loss,
respectively.
The Globe Group’s foreign exchange risk management policy is to
maintain a hedged financial position, after taking into account expected
USD flows from operations and financing transactions. Globe Telecom
enters into short-term foreign currency forwards and long-term foreign
currency swap contracts in order to achieve this target.
28.2.2 Credit Risk
Applications for postpaid service are subjected to standard credit evaluation and
verification procedures. The Credit Management unit of the Globe Group
continuously reviews credit policies and processes and implements various credit
actions, depending on assessed risks, to minimize credit exposure. Receivable
balances of postpaid subscribers are being monitored on a regular basis and
appropriate credit treatments are applied at various stages of delinquency.
Likewise, net receivable balances from carriers of traffic are also being monitored
and subjected to appropriate actions to manage credit risk. The maximum credit
exposure relates to receivables net of any allowances provided.
With respect to credit risk arising from other financial assets of the Globe Group,
which comprise cash and cash equivalents, short-term investments, AFS financial
investments, HTM investments, and certain derivative instruments, the Globe
Group’s exposure to credit risk arises from the default of the counterparty, with a
maximum exposure equal to the carrying amount of these instruments. The Globe
Group’s investments comprise short-term bank deposits and government
securities. Credit risk from these investments is managed on a Globe Group basis.
For its investments with banks, the Globe Group has a counterparty risk
management policy which allocates investment limits based on counterparty
credit rating and credit risk profile.
*SGVMC114676*
- 78 The Globe Group makes a quarterly assessment of the credit standing of its
investment counterparties, and allocates investment limits based on size, liquidity,
profitability, and asset quality. For investments in government securities, these
are denominated in local currency and are considered to be relatively risk-free.
The usage of limits is regularly monitored. For its derivative counterparties, the
Globe Group deals only with counterparty banks with investment grade ratings
and large local banks. Credit ratings of derivative counterparties are reviewed
quarterly.
Following are the Globe Group exposures with its investment counterparties for
cash and cash equivalents as of December 31:
2010
52%
16%
3%
29%
Local bank deposits
Onshore foreign bank
Offshore bank deposit
Special deposit account
2009
48%
25%
12%
15%
2008
53%
27%
13%
7%
The Globe Group has not executed any credit guarantees in favor of other parties.
There is minimal exposure to credit concentration risk within the Globe Group.
Credit exposures from subscribers and carrier partners continue to be managed
closely for possible deterioration. When necessary, credit management measures
are proactively implemented and identified collection risks are being provided for
accordingly. Outstanding credit exposures from financial instruments are
monitored daily and allowable exposures are reviewed quarterly.
The tables below show the aging analysis of the Globe Group’s receivables as of
December 31.
2010
Neither Past
Due Nor
Impaired
Wireless receivables:
Consumer
Key corporate accounts
Other corporations and Small
and Medium Enterprises
(SME)
Wireline receivables:
Consumer
Key corporate accounts
Other corporations and
SME
Other trade receivables
Traffic receivables:
Foreign
Local
Other receivables
Total
Less than
30 days
Past Due But Not Impaired
31 to 60
61 to 90
More than
days
days
90 days
(In Thousand Pesos)
Impaired
Financial
Assets
Total
= 521,771
P
19,975
P
=739,554
103,032
P
=311,860
150,689
P
=139,330
127,929
P
=744,827
201,733
P
=346,499
74,131
P
=2,803,841
677,489
129,570
671,316
152,544
995,130
76,092
538,641
18,802
286,061
175,710
1,122,270
83,920
504,550
636,638
4,117,968
235,480
3,066
215,510
182,566
111,297
165,621
66,806
216,576
76,989
823,085
1,252,527
179,015
1,958,609
1,569,929
86,869
325,415
–
50,922
448,998
–
30,474
307,392
8,447
16,125
299,507
5,186
49,166
949,240
4,214
140,542
1,572,084
374,098
3,902,636
17,847
1,731,708
133,474
1,865,182
647,464
= 3,509,377
P
–
–
–
–
P
=1,444,128
–
–
–
–
P
=854,480
–
–
–
–
P
=590,754
–
175,241
89,815
–
–
265,056
–
11,414
P
=2,075,724 P
=2,353,104
1,906,949
223,289
2,130,238
658,878
P
=10,827,567
*SGVMC114676*
- 79 2009
Wireless receivables:
Consumer
Key corporate accounts
Other corporations and
SME
Wireline receivables:
Consumer
Key corporate accounts
Other corporations and
SME
Other trade receivables
Traffic receivables:
Foreign
Local
Other receivables
Total
Past Due But Not Impaired
31 to 60
61 to 90
days
days
(In Thousand Pesos)
Neither Past
Due Nor
Impaired
Less than
30 days
More than
90 days
Impaired
Financial
Assets
=262,965
P
32,777
P
=354,222
133,249
P
=151,239
106,967
P
=93,469
69,193
P
=255,714
116,094
P
=88,088
20,154
P
=1,205,697
478,434
110,527
406,269
103,315
590,786
39,450
297,656
20,535
183,197
49,246
421,054
47,690
155,932
370,763
2,054,894
158,475
16,282
152,776
97,368
82,966
153,984
79,941
242,937
129,685
804,630
610,142
76,400
1,213,985
1,391,601
71,041
245,798
–
48,108
298,252
16,407
25,663
262,613
2,715
13,690
336,568
–
46,182
980,497
–
93,228
779,770
2,681
297,912
2,903,498
21,803
1,838,777
303,090
2,141,867
626,640
=3,420,574
P
–
–
–
–
P
=905,445
–
–
–
–
P
=562,984
–
–
–
–
P
=519,765
–
97,971
–
79,435
–
177,406
–
8,111
P
=1,401,551 P
=1,123,900
1,936,748
382,525
2,319,273
634,751
P
=7,934,219
Total
2008
Neither
Wireless receivables:
Consumer
Key corporate accounts
Other corporations and SME
Wireline receivables:
Consumer
Key corporate accounts
Other corporations and SME
Other trade receivables
Traffic receivables:
Foreign
Local
Other receivables
Total
Past
Due Nor
Impaired
Past Due But Not Impaired
Less than
31 to
61 to
More than
30 days
60 days
90 days
90 days
(In Thousands Pesos)
Impaired
Financial
Assets
Total
=403,189
P
20,824
100,212
524,225
=370,507
P
116,519
79,592
566,618
=193,777
P
104,325
42,246
340,348
=100,177
P
51,295
20,611
172,083
=255,357
P
53,863
50,781
360,001
=131,423
P
62,132
139,099
332,654
=1,454,430
P
408,958
432,541
2,295,929
211,371
280,441
77,210
569,022
–
120,056
246790
37,900
404,746
12,625
91,340
172183
20,637
284,160
3,281
71,724
116128
15,581
203,433
3,686
–
339174
9,132
348,306
1,667
288,433
87,958
60,579
436,970
–
782,924
1,242,674
221,039
2,246,637
21,259
2,879,081
349,642
3,228,723
466,610
=4,788,580
P
–
–
–
–
=983,989
P
–
–
–
–
=627,789
P
–
–
–
–
=379,202
P
–
–
–
–
=709,974
P
79,559
309,728
389,287
11,560
=1,170,471
P
2,958,640
659,370
3,618,010
478,170
=8,660,005
P
Total allowance for impairment losses amounted to =
P2,453.44 million,
=1,350.99 million and =
P
P1,186.66 million includes allowance for impairment
arising from collective assessment amounted to P
=328.72 million, =
P99.21 million
and P
=16.19 million as of December 31, 2010, 2009 and 2008, respectively
(see Note 4).
*SGVMC114676*
- 80 The table below provides information regarding the credit risk exposure of the
Globe Group by classifying assets according to the Globe Group’s credit ratings
of receivables as of December 31. The Globe Group’s credit rating is based on
individual borrower characteristics and their relationship to credit event
experiences.
2010
Wireless receivables:
Consumer
Key corporate accounts
Other corporations and SME
Wireline receivables:
Consumer
Key corporate accounts
Other corporations and SME
Total
Neither past-due nor impaired
High Quality Medium Quality
Low Quality
(In Thousand Pesos)
Total
P
=280,831
9,817
60,842
351,490
P
=64,889
1,183
4,358
70,430
P
=176,051
8,975
64,370
249,396
P
=521,771
19,975
129,570
671,316
196,067
2,912
79,049
278,028
P
=629,518
39,413
154
7,512
47,079
P
=117,509
–
–
308
308
P
=249,704
235,480
3,066
86,869
325,415
P
=996,731
Neither past-due nor impaired
High Quality Medium Quality
Low Quality
(In Thousand Pesos)
Total
2009
Wireless receivables:
Consumer
Key corporate accounts
Other corporations and SME
Wireline receivables:
Consumer
Key corporate accounts
Other corporations and SME
Total
=183,594
P
27,339
25,054
235,987
=41,292
P
3,867
37,693
82,852
=38,079
P
1,571
47,780
87,430
=262,965
P
32,777
110,527
406,269
70,395
13,658
34,676
118,729
=354,716
P
10,563
116
4,036
14,715
=97,567
P
77,517
2,508
32,329
112,354
=199,784
P
158,475
16,282
71,041
245,798
=652,067
P
2008
Neither past-due nor impaired
High Quality Medium Quality
Low Quality
(In Thousands Pesos)
Wireless receivables:
Consumer
Key corporate accounts
Other corporations and SME
Wireline receivables:
Consumer
Key corporate accounts
Other corporations and SME
Total
Total
=278,522
P
17,006
13,200
308,728
=64,959
P
2,338
37,113
104,410
=59,708
P
1,480
49,899
111,087
=403,189
P
20,824
100,212
524,225
82,158
273,941
28,452
384,551
=693,279
P
44,684
6,499
12,146
63,329
=167,739
P
84,529
1
36,612
121,142
=232,229
P
211,371
280,441
77,210
569,022
=1,093,247
P
*SGVMC114676*
- 81 High quality accounts are accounts considered to be high value and have
consistently exhibited good paying habits. Medium quality accounts are active
accounts with propensity of deteriorating to mid-range age buckets. These
accounts do not flow through to permanent disconnection status as they generally
respond to credit actions and update their payments accordingly. Low quality
accounts are accounts which have probability of impairment based on historical
trend. These accounts show propensity to default in payment despite regular
follow-up actions and extended payment terms. Impairment losses are also
provided for these accounts based on net flow rate.
Traffic receivables that are neither past due nor impaired are considered to be high
quality given the reciprocal nature of the Globe Group’s interconnect and roaming
partner agreements with the carriers and the Globe Group’s historical collection
experience.
Other receivables are considered high quality accounts as these are substantially
from credit card companies and Globe dealers.
The following is a reconciliation of the changes in the allowance for impairment
losses for receivables as of December 31 (in thousand pesos)
(see Notes 4 and 23):
2010
Subscribers
At beginning of year
Charges for the year
Reversals/write offs/
adjustments
At end of year
Other
Key corporate corporations
Consumer
accounts
and SME
P
=176,973
P
=165,416
P
=820,403
987,636
81,395
124,549
(130,348)
P
=1,677,691
(12,746)
P
=245,622
(39,366)
P
=250,599
Traffic
Settlements
and Others
P
=188,199
91,333
Non-trade
(Note 6)
P
=34,776
620
–
P
=279,532
(14,351)
P
=21,045
Total
P
=1,385,767
1,285,533
(196,811)
P
=2,474,489
2009
Subscribers
At beginning of year
Charges for the year
Reversals/write offs/
adjustments
At end of year
Key corporate
Consumer
accounts
=400,926
P
=119,986
P
856,184
35,900
(436,707)
P820,403
=
21,087
=176,973
P
Other
corporations
and SME
=264,900
P
79,898
(179,382)
P165,416
=
Traffic
Settlements
and Others
=400,847
P
(211,351)
Non-trade
(Note 6)
=43,753
P
(5,998)
(1,297)
=188,199
P
(2,979)
=34,776
P
Total
=1,230,412
P
754,633
(599,278)
=1,385,767
P
*SGVMC114676*
- 82 2008
Subscribers
At beginning of year
Charges for the year
Reversals/write offs/
adjustments
At end of year
Key corporate
Consumer
accounts
=481,599
P
=336,558
P
501,426
146,725
(582,099)
P400,926
=
(363,297)
P119,986
=
Other
Traffic
corporations Settlements and
Others
and SME
=279,266
P
=286,052
P
187,523
134,504
(201,889)
P264,900
=
(19,709)
=400,847
P
Non-trade
(Note 6)
=35,720
P
9,601
(1,568)
=43,753
P
Total
=1,419,195
P
979,779
(1,168,562)
P1,230,412
=
28.2.3 Liquidity Risk
The Globe Group seeks to manage its liquidity profile to be able to finance
capital expenditures and service maturing debts. As of December 31, 2010, 2009
and 2008, Globe Group has available uncommitted short-term credit facilities
of USD59.00 million and =
P11,017.40 million, USD19.00 million and
=9,004.90 million, USD39.00 million and P
P
=5,297.10 million, respectively. As of
December 31, 2010, 2009 and 2008, the Globe Group has available committed
long-term facilities of =
P1,000.00 million, USD93.00 million and USD66.00
million, respectively, which remain undrawn.
As part of its liquidity risk management, the Globe Group regularly evaluates its
projected and actual cash flows. It also continuously assesses conditions in the
financial markets for opportunities to pursue fund raising activities, in case any
requirements arise. Fund raising activities may include bank loans, export credit
agency facilities and capital market issues.
*SGVMC114676*
- 83 The following tables show comparative information about the Globe Group’s financial instruments as of December 31 that are exposed to liquidity
risk and interest rate risk and presented by maturity profile including forecasted interest payments for the next five years from December 31 figures
(in thousands).
Long-term Liabilities:
2010
2011
Liabilities:
Long-term debt
Fixed rate
Philippine peso
Interest rate
Floating rate
USD notes
Interest rate
=4,138,700
P
5.97%, 6.68%, 7.03%,
7.4%
2012
2013
=7,033,150
P
=3,397,450
P
=4,381,850
P
5.97%, 6.68%, 7.03%, 5.97%, 6.68%, 7.03%, 7.03%, 7.4%, 8%,
7.4%, 7.5%
7.4%
8.36%
$87,721
$28,642
$14,273
6-mo. LIBOR+ 3.4%
6-mo. LIBOR+3.4% 6-mo. LIBOR+3.4%
margin; 6-mo. margin; 6-mo. LIBOR+
margin; 6-mo.
LIBOR+2.65% 2.65% margin; 3mo or
LIBOR+2.65%
margin; 3mo or 6mo
6mo LIBOR +.43%
margin
LIBOR +.43%
margin (rounded to
1/16%); 6mo LIBOR
margin (rounded to
1/16%); 6mo LIBOR
+3% margin
+3% margin; 1mo or
3mo or 6mo
LIBOR+2% margin;
6mo LIBOR+ .85%
Philippine peso
=743,771
P
=4,122,343
P
=5,747,343
P
Interest rate
PDSTF 3mo +
PDSTF 3mo + 0.75% PDSTF 3mo + 0.75%
margin; PDSTF3mo + margin; PDSTF3mo +
0.75% margin;
1.25% margin;
1.25% margin;
PDSTF3mo + 1.25%
PDSTF3mo + 1%
PDSTF3mo + 1%
margin; PDSTF3mo
margin; PDSTF6mo + margin; PDSTF6mo +
+ 1% margin;
1.25% margin
PDSTF6mo + 1.25% 1.25% margin; PDSTF 3
mo + 1.50% margin
margin
Interest payable*
PHP debt
USD debt
= 2,023,562
P
$4,578
2014
= 1,494,852
P
$2,605
2015 and
thereafter
Total
(in USD)
Total
Debt Carrying Value
(in PHP) Issuance Costs
(in PHP)
=4,008,900
P
$–
=22,960,050
P
= 71,638
P
Fair Value
(in PHP)
=22,888,412 =
P
P24,816,963
7.03%, 8.36%
$17,710
6-mo.
LIBOR+3.4%
margin; 6-mo.
LIBOR+2.65%
margin
$21,665
6-mo. LIBOR+
3.4% margin
170,011
–
130,874
7,317,483
7,410,651
=4,603,843
P
PDSTF 3mo +
0.75% margin;
PDSTF3mo +
1.25% margin;
PDSTF3mo + 1
margin %;
PDSTF6mo +
1.25% margin
=5,025,000
P
PDSTF 3mo +
0.75% margin;
PDSTF 3mo +
0.65% margin
–
20,242,300
76,725
20,165,575
20,136,024
$170,011
= 43,202,350
P
= 279,237
P
=–
P
$11,517
= 5,694,607
P
$–
P–
=
$–
= 1,152,815
P
$1,918
= 606,723
P
$1,355
= 416,655
P
$1,061
= 50,371,470 =
P
P52,363,638
P–
=
$–
*Used month-end USD LIBOR and Philippine Dealing and Exchange Corporation (PDEX) rates.
*Using P
=43.81- USD exchange rate as of December 31, 2010.
*SGVMC114676*
P–
=
$–
- 84 2009
2010
Liabilities:
Long-term debt
Fixed rate
Philippine peso
Interest rate
Floating rate
USD notes
Interest rate
=13,700
P
7.24%; 8.36%
2011
=4,093,700
P
5.97%;
6.68%; 7.03%;
7.24%; 8.36%
2012
=6,988,150
P
5.97%;
6.68%;7.03%;
7.50%; 8.00%
2013
=933,700
P
5.97%;
6.68%; 7.03%;
7.24%; 36%
2014 and
thereafter
Total
(in USD)
Total
(in PHP)
Debt
Issuance Costs
=6,450,750
P
$–
=18,480,000
P
=95,604
P
=2,369,013
P
$2,727
=2,181,085
P
$1,305
=1,483,347
P
$157
=1,020,253
P
$–
Fair Value
(in PHP)
148,133
–
66,734
6,810,357
5,472,014
–
20,316,923
35,654
20,281,269
20,245,723
$148,133
=38,796,923
P
=197,992
P
=–
P
$4,189
=7,692,264
P
$–
=18,384,396 =
P
P19,413,016
7.24%; 7.50%;
8.00%; 8.36%
$66,622
$68,511
$13,000
$–
$–
6mo LIBOR+.85%
6mo LIBOR+ .85%;
6mo LIBOR + 3%
;6mo LIBOR+3%
6mo LIBOR + 3% margin; 3mo or 6mo
margin; 1mo or 3mo margin; 1mo or 3mo or
LIBOR + .43%
or 6mo LIBOR+2%
6mo LIBOR+ 2%margin (rounded to
margin; 3mo or 6mo
margin; 3mo or 6mo
1/16%)
LIBOR+.43% margin LIBOR + .43% margin
(rounded to 1/16%)
(rounded to 1/16%)
Philippine peso
=2,580,873
P
=718,771
P
=6,947,343
P
=7,566,093
P
=2,503,843
P
Interest rate
PDSTF3mo + 1%
PDSTF3mo + 1%
PDSTF3mo + 1% PDSTF3mo + 1% PDSTF3mo + 1%
margin; PDSTF margin; PDSTF3mo+ margin; PDSTF 3mo+ margin; PDSTF3
margin;
3mo+ 1.30% , 1.30% , PDSTF3mo + 1.30% , PDSTF3mo +
mo+ 1.30% ,
PDSTF6mo +
PDSTF3mo + 1.10%
1.10% margin,1.10% margin, PDSTF
PDSTF3mo +
1.25% margin
margin, PDSTF3mo +
PDSTF3mo + 1%
3mo + 1% margin;
1.10% margin,
1% margin; PDSTF margin; PDSTF6mo + PDSTF6mo + 1.25% PDSTF3mo + 1%
6mo + 1.25% margin
1.25% margin margin; PDSTF3mo +
margin;
1.50% margin
PDSTF6mo +
1.25% margin
Interest payable*
PHP debt
USD debt
Carrying Value
(in PHP)
=638,566
P
$–
P–
=
$–
=45,476,022 =
P
P45,130,753
P–
=
$–
*Used month-end USD LIBOR and Philippine Dealing and Exchange Corporation (PDEX) rates.
*Using P
=46.425 - USD exchange rate as of December 31, 2009.
*SGVMC114676*
P–
=
$–
- 85 2008
Liabilities:
Long-term debt
Fixed rate
USD notes
Interest rate
Philippine peso
Interest rate
Floating rate
USD notes
Interest rate
Philippine peso
Interest rate
2009
2010
2011
2012
2013 and
thereafter
Total
USD Debt
$6,140
6.44%
$–
$–
$–
$–
$6,140
=–
P
=4,700,000
P
11.70%
=–
P
–
=4,080,000
P
13.79%; 5.97%;
6.68%; 7.03%
=6,087,000
P
13.79%; 5.97%;
6.68%; 7.03%
=920,000
P
13.79%; 5.97%;
6.68%; 7.03%
–
$32,222
3mo/6mo
LIBOR+.43%
margin (rounded
to .06%);
LIBOR+.85%
$32,222
3mo/6mo
LIBOR+.43%
margin (rounded
to .06%);
LIBOR+.85%
$26,112
$5,000
3mo/6mo
3mo/6mo
LIBOR+.43%
LIBOR+.43%
margin (rounded margin (rounded
to .06%);
to .06%)
LIBOR+.85%
$–
=1,240,373
P
=2,503,173
P
PDSTF3mo+ PDSTF3mo+1.30%
1.38%;
;
PDSTF1mo+ PDSTF1mo+1.10%
1% margin
margin;
PDSTF3mo+1%
margin;
PDSTF1mo+1%
margin
=25,000
P
=5,825,000
P
PDSTF3mo+
PDSTF3mo+
1.30%;
1.30%;
PDSTF1mo+
PDSTF1mo+
1.10% margin;
1.10% margin;
PDSTF3mo+1% PDSTF3mo+1%
margin
margin;
PDSTF1mo+
1.50% margin
=6,443,750
P
PDSTF3mo+
1.30%;
PDSTF1mo+
1.10% margin;
PDSTF3mo+
1% margin;
PDSTF1mo+
1.25% margin
Interest payable*
PHP debt
=2,244,472
P
=1,870,132
P
=1,522,663
P
=845,511
P
USD debt
$1,775
$824
$263
$63
*Used month-end USD LIBOR and Philippine Dealing and Exchange Corporation (PDEX) rates.
*Using P
=47.655-USD exchange rate as of December 31, 2008.
=391,305
P
$–
Total
Debt
PHP Debt Issuance Costs
Carrying Value
(in PHP)
Fair Value
(in PHP)
=–
P
=292,610
P
=299,267
P
15,787,000
47,091
15,739,909
16,314,939
95,556
–
10,045
4,543,655
4,588,401
–
16,037,296
27,532
16,009,764
16,009,764
$101,696
=31,824,296
P
=84,668
P
=36,585,938
P
=37,212,371
P
=–
P
$2,925
=6,874,083
P
$–
P–
=
$–
P–
=
$–
P–
=
$–
*SGVMC114676*
- 86 The following tables present the maturity profile of the Globe Group’s other liabilities and derivative instruments (undiscounted cash flows including
swap costs payments/receipts except for other long-term liabilities) as of December 31 (in thousands):
2010
Other Financial Liabilities:
Less than
On demand
1 year
Accounts payable and accrued expenses*
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
Total
= 426,696
P
= 19,906,644
P
=–
P
=–
P
=–
P
=–
P
=–
P
= 20,333,340
P
Derivative liabilities
–
93,336
152,529
–
–
–
–
245,865
Other long-term liabilities
–
–
–
–
–
–
640,927
640,927
= 426,696
P
= 19,999,980
P
= 152,529
P
=–
P
=–
P
=–
P
= 640,927
P
= 21,220,132
P
*Excludes taxes payable which is not a financial instrument.
Derivative Instruments:
2011
Receive
Projected Swap Coupons*:
Principal Only Swaps
Interest Rate Swaps
2012
Pay
Receive
2013
Pay
Receive
2014
Pay
Receive
2015 and beyond
Receive
Pay
Pay
=–
P
= 4,048
P
=–
P
= 2,572
P
=–
P
=–
P
=–
P
=–
P
=–
P
146,821
4,065
51,911
16,745
–
19,889
–
11,388
*Projected USD swap coupons were converted to PHP at the balance sheet rate. Further, it was assumed that 3m Libor, 3m PDSTF, and 6m PDSTF would stay at December 31, 2010 levels.
2011
Projected Principal Exchanges*:
Principal Only Swaps
Forward Sale of USD
2012
2013
2014
Receive
Pay
Receive
Pay
Receive
Pay
Receive
Pay
$–
= 1,539,082
P
=–
P
$35,000
$2,500
–
= 140,825
P
–
$–
P=
–
$–
–
P–
=
–
P–
=
–
2015 and beyond
Receive
Pay
$–
–
*Projected principal exchanges represent commitments to purchase USD for payment of USD debts with the same maturities.
*SGVMC114676*
P–
=
–
- 87 2009
Other Financial Liabilities:
Less than
Accounts payable and accrued expenses*
On demand
1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
Total
=2,201,314
P
=16,458,817
P
=–
P
=–
P
=–
P
=–
P
=–
P
=18,660,131
P
Derivative liabilities
–
85,867
5,515
–
1,074
–
–
92,456
Notes payable
–
2,000,829
–
–
–
–
–
2,000,829
Other long-term liabilities
–
735,944
–
–
–
–
647,416
1,383,360
=2,201,314
P
=19,281,457
P
=5,515
P
=–
P
=1,074
P
=–
P
=647,416
P
=22,136,776
P
*Excludes taxes payable which is not a financial instrument.
Derivative Instruments:
2010
Projected Swap Coupons*:
Principal Only Swaps
Interest Rate Swaps
2011
2012
2013
Receive
Pay
Receive
Pay
Receive
Pay
Receive
Pay
=–
P
–
P4,290
=
21,424
=–
P
–
=5,436
P
4,401
=–
P
4,240
=2,726
P
–
=–
P
–
=–
P
–
2014 and beyond
Receive
Pay
=–
P
–
=–
P
–
*Projected USD swap coupons were converted to PHP at the balance sheet rate. Further, it was assumed that 3m Libor, 3m PDSTF, and 6m PDSTF would stay at December 31, 2009 levels.
2010
Projected Principal Exchanges*:
Principal Only Swaps
Forward Purchase of USD
Forward Sale of USD
2011
2012
2013
Receive
Pay
Receive
Pay
Receive
Pay
Receive
Pay
$–
$20,000
=964,150
P
=–
P
=959,500
P
$20,000
$–
–
–
=–
P
–
–
$2,500
–
–
=140,825
P
–
–
$
–
–
=–
P
–
–
2014 and beyond
Receive
Pay
$–
–
–
*Projected principal exchanges represent commitments to purchase USD for payment of USD debts with the same maturities.
*SGVMC114676*
=–
P
–
–
- 88 2008
Other Financial Liabilities:
Less than
Accounts payable and accrued expenses*
On demand
1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
Total
=1,522,730
P
=14,196,610
P
=–
P
=–
P
=–
P
=–
P
=–
P
=15,719,340
P
–
163,989
–
–
21,665
–
–
185,654
4,002,160
–
–
–
–
–
–
4,002,160
Derivative liabilities
Notes payable
Other long-term liabilities
–
86,099
93,632
102,107
111,348
121,426
898,835
1,413,447
=5,524,890
P
=14,446,698
P
=93,632
P
=102,107
P
=133,013
P
=121,426
P
=898,835
P
=21,320,601
P
*Excludes taxes payable which is not a financial instrument.
Derivative Instruments:
2009
Receive
Projected Swap Coupons*:
Principal Only Swaps
Interest Rate Swaps
=–
P
–
Pay
=5,580
P
3,293
2010
Receive
=–
P
–
2011
Receive
Pay
P5,580
=
15,306
=–
P
4,093
2012
Receive
Pay
=5,580
P
–
=–
P
4,491
2013 and beyond
Receive
Pay
Pay
=2,798
P
–
=–
P
–
=–
P
–
*Projected USD swap coupons were converted to PHP at the balance sheet rate. Further, it was assumed that 3m Libor, 3m PDSTF, and 6m PDSTF would stay at December 31, 2008 levels.
Projected Principal Exchanges*:
Principal Only Swaps
Forwards (Deliverable and
Nondeliverable)
2009
Receive
Pay
2010
Receive
Pay
2011
Receive
Pay
2012
Receive
$–
=–
P
$–
=–
P
$–
=–
P
$2,500
=140,825
P
$–
=–
P
=1,018,058
P
$22,000
–
–
–
–
–
–
–
–
Pay
2013 and beyond
Receive
Pay
*Projected principal exchanges represent commitments to purchase USD for payment of USD debts with the same maturities.
*SGVMC114676*
- 89 28.2.4 Hedging Objectives and Policies Liquidity Risk
The Globe Group uses a combination of natural hedges and derivative hedging to
manage its foreign exchange exposure. It uses interest rate derivatives to reduce
earnings volatility related to interest rate movements.
It is the Globe Group’s policy to ensure that capabilities exist for active but
conservative management of its foreign exchange and interest rate risks. The
Globe Group does not engage in any speculative derivative transactions.
Authorized derivative instruments include currency forward contracts
(freestanding and embedded), currency swap contracts, interest rate swap
contracts and currency option contracts (freestanding and embedded). Certain
interest rate swaps are entered with option combination or structured provisions.
28.3
Derivative Financial Instruments
The Globe Group’s freestanding and embedded derivative financial instruments are
accounted for as hedges or transactions not designated as hedges. The table below sets out
information about the Globe Group’s derivative financial instruments and the related fair
values as of December 31 (in thousands):
2010
Derivative instruments designated as hedges:
Cash flow hedges:
Interest rate swaps
Nondeliverable forwards*
Derivative instruments not designated
as hedges:
Freestanding:
Interest rate swaps
Currency swaps
Embedded
Currency forwards**
Net
Notional
Amount
Notional
Amount
Derivative
Asset
Derivative
Liability
$57,000
35,000
P
=5,000,000
–
P
=–
6,255
P
=163,448
8,285
6,667
2,500
–
–
11,743
–
210
35,519
14,651
–
1,890
P
=19,888
38,403
P
=245,865
Notional
Amount
Notional
Amount
Derivative
Asset
Derivative
Liability
$51,000
=–
P
=–
P
=32,221
P
40,000
10,000
2,500
–
–
–
14,424
15,468
–
9,775
5,084
26,789
9,972
–
6,413
=36,305
P
18,587
P92,456
=
* All in sell position.
** The embedded currency forwards are at a net sell position.
2009
Derivative instruments designated as hedges:
Cash flow hedges:
Interest rate swaps
Derivative instruments not designated
as hedges:
Freestanding:
Nondeliverable forwards*
Interest rate swaps
Currency swaps
Embedded
Currency forwards**
Net
* Buy position: USD20,000; Sell position: USD20,000.
** The embedded currency forwards are at a net sell position.
*SGVMC114676*
- 90 2008
Derivative instruments designated as hedges:
Cash flow hedges:
Nondeliverable forwards*
Interest rate swaps
Derivative instruments not designated
as hedges:
Freestanding:
Deliverable and nondeliverable forwards**
Interest rate swaps
Currency swaps
Embedded:
Currency forwards
Currency options***
Net
Notional
Amount
Notional
Amount
Derivative
Asset
Derivative
Liability
$10,000
25,000
P–
=
–
P–
=
–
P19,456
=
37,804
75,100
13,333
2,500
–
2,000,000
–
109,454
8,086
–
70,705
14,752
29,731
25,564
3
–
–
51,470
2
=169,012
P
13,206
–
=185,654
P
*All sell position
**Buy position: USD31,550; Sell position: USD43,550
****All embedded options are long call positions.
The table below also sets out information about the maturities of Globe Group’s derivative
instruments as of December 31 that were entered into to manage interest and foreign
exchange risks related to the long-term debt and US dollar-based revenues (in thousands).
2010
<1 year >1-<2 years >2-<3 years >3-<4 years >4-<5 years
Derivatives:
Currency Swaps:
Notional amount
Weighted swap rate
Pay fixed rate
Interest Rate Swaps
Fixed-Floating
Notional USD
Pay-floating rate
Receive-fixed rate
Floating-Fixed
Notional Peso
Notional USD
Pay-fixed rate
Receive-floating rate
Nondeliverable Forwards
Notional USD
Forward rate
Total
$–
$2,500
$–
$–
$–
$2,500
P56.33
=
4.62%
$–
$5,000
$–
$–
$–
$5,000
USD LIBOR+4.23%
9.75%
P50,000
=
$43,667
–
P200,000
=
$15,000
= 625,000
P
–
= 2,100,000
P
–
= 2,025,000
P
–
$114,127
$58,667
1.01% - 4.92%
USD LIBOR-3M PDSTF
$35,000
$–
$–
$–
$–
$35,000
= 42.84 –P45.21
P
*SGVMC114676*
- 91 2009
Derivatives:
Currency Swaps:
Notional amount
Weighted swap rate
Pay fixed rate
Interest Rate Swaps
Fixed-Floating
Notional USD
Pay-floating rate
Receive-fixed rate
Floating-Fixed
Notional USD
Pay-fixed rate
Receive-floating rate
Nondeliverable Forwards
Notional USD
Forward rate
<1 year
>1-<2 years
>2-<3 years
>3-<4 years
>4-<5 years
Total
$–
$–
$2,500
$–
$–
$2,500
P56.33
=
4.62%
$–
$–
$5,000
$–
$–
$5,000
USD LIBOR+4.23%
9.75%
$27,333
$23,667
$5,000
$–
$–
$56,000
1.64% - 4.84%
USD LIBOR
$40,000
$–
$–
$–
$–
$40,000
=47.63 - P
P
=48.70
<1 year
>1-<2 years
>2-<3 years
>3-<4 years
>4-<5 years
Total
$–
$–
$–
$2,500
$–
$2,500
P56.33
=
4.62%
=1,000,000
P
$–
P–
=
$–
P–
=
$–
=–
P
$5,000
P–
=
$–
$20,984
$5,000
USD LIBOR+4.23% - Mart
+1.38%
9.75% - 11.70%
=1,000,000
P
$13,333
=–
P
$13,333
=–
P
$6,667
P–
=
$–
P–
=
$–
$20,984
$33,333
4.54% - 7.09%
USD LIBOR - Mart +1.38%
$85,100
$–
$–
$–
$–
$85,100
=42.80 - P
P
=54.10
2008
Derivatives:
Currency Swaps:
Notional amount
Weighted swap rate
Pay fixed rate
Interest Rate Swaps
Fixed-Floating
Notional Peso
Notional USD
Pay-floating rate
Receive-fixed rate
Floating-Fixed
Notional Peso
Notional USD
Pay-fixed rate
Receive-floating rate
Deliverable and
Nondeliverable Forwards
Notional USD
Forward rate
The Globe Group’s other financial instruments that are exposed to interest rate risk are
cash and cash equivalents. These mature in less than a year and are subject to market
interest rate fluctuations.
*SGVMC114676*
- 92 The Globe Group’s other financial instruments which are non-interest bearing and
therefore not subject to interest rate risk are trade and other receivables, accounts
payable and accrued expenses and long-term liabilities.
The subsequent sections will discuss the Globe Group’s derivative financial instruments
according to the type of financial risk being managed and the details of derivative
financial instruments that are categorized into those accounted for as hedges and those that
are not designated as hedges.
28.4
Derivative Instruments Accounted for as Hedges
The following sections discuss in detail the derivative instruments accounted for as cash
flow hedges.
·
Interest Rate Swaps
As of December 31, 2010, 2009 and 2008, the Globe Group has USD57.00 million,
USD51.00 million and USD25.00 million, respectively, in notional amount of interest
rate swap that has been designated as cash flow hedge. The interest rate swaps
effectively fixed the benchmark rate of the hedged loan at 1.01% to 4.84% over the
duration of the agreement, which involves semi-annual intervals up to April 2012.
The Globe Group also has an outstanding interest rate swap contract with a notional
amount of P
=5,000.00 million, which effectively swaps a floating rate PHPdenominated loan into fixed rate, with quarterly payment intervals up to September
2015.
As of December 31, 2010, 2009 and 2008, the fair value of the outstanding swap
amounted to =
P163.45 million loss, P
=32.22 million loss and =
P37.80 million loss,
respectively, of which =
P114.41 million, =
P22.56 million and =
P26.46 million (net of
tax), respectively, is reported as “Other reserves” in the equity section of the
consolidated statements of financial position.
Accumulated swap cost for the years ended December 31, 2010, 2009 and 2008
amounted to =
P58.98 million, =
P40.21 million and =
P19.46 million, respectively.
·
Nondeliverable Forwards
The Globe Group entered into short-term nondeliverable currency forward contracts
to hedge the changes in the cash flows of USD revenues related to changes in foreign
currency exchange rates with maturities until December 2011. These currency
forward contracts have a notional amount of USD35.00 million and USD25.00 million
as of December 31, 2010 and 2008, respectively. There was no outstanding nondeliverable forward as of December 31, 2009. The fair value of the outstanding shortterm nondeliverable currency forwards as of December 31, 2010 and 2008 amounted
to a loss of =
P2.03 million and =
P19.46 million, respectively, of which P
=1.42 million
and P
=13.62 million (net of tax), respectively, is reported in the equity section of the
consolidated statements of financial position.
Hedging gain loss on derivatives intended to manage foreign currency fluctuations on
dollar based revenues for the years ended December 31, 2010, 2009 and 2008
amounted to =
P75.56 million gain, =
P18.47 million loss and =
P127.52 million loss,
respectively. These hedging losses are reflected under “Service revenues” in the
consolidated statements of comprehensive income.
*SGVMC114676*
- 93 28.5
Other Derivative Instruments not Designated as Hedges
The Globe Group enters into certain derivatives as economic hedges of certain
underlying exposures. Such derivatives, which include embedded and freestanding
currency forwards, embedded call options, and certain currency and interest rate
swaps with option combination or structured provisions, are not designated as
accounting hedges. The gains or losses on these instruments are accounted for
directly in the consolidated statements of comprehensive income. This section
consists of freestanding derivatives and embedded derivatives found in both financial
and nonfinancial contracts.
28.6
Freestanding Derivatives
Freestanding derivatives that are not designated as hedges consist of currency
forwards, options, currency and interest rate swaps entered into by the Globe Group.
Fair value changes on these instruments are accounted for directly in the consolidated
statements of comprehensive income.
·
Deliverable and Nondeliverable Forwards
As of December 31, 2010, the Globe Group has no more outstanding non
deliverable currency forward contracts not designated as hedges.
·
Interest Rate Swaps
The Globe Group has outstanding interest rate swap contracts which swap certain
fixed and floating USD-denominated loans into floating and fixed rate with semiannual payments interval up to April 2012. The swaps have outstanding notional
of USD6.67 million as of December 31, 2010, USD10.00 million as of
December 31, 2009 and USD13.33 million and =
P2,000.00 million as of
December 31, 2008.
The fair values on the interest rate swaps as of December 31, 2010, 2009 and
2008 amounted to =
P11.53 million net gain, =
P10.38 million net gain, and
=6.67 million net loss, respectively.
P
·
28.7
Currency Swaps
The Globe Group also has an outstanding foreign currency swap agreement with a
certain bank, under which it swaps the principal of USD-denominated loans into
PHP up to April 2012. Under these contracts, swap costs are payable in semiannual intervals in PHP or USD. The notional of the swaps amounted to
USD2.50 million as of December 31, 2010, 2009, and 2008. The fair value loss
of the currency swaps as of December 31, 2010, 2009 and 2008 amounted to
=35.52 million, P
P
=26.79 million and P
=29.73 million, respectively.
Embedded Derivatives
The Globe Group has instituted a process to identify any derivatives embedded in its
financial or non financial contracts. Based on PAS 39, the Globe Group assesses
whether these derivatives are required to be bifurcated or are exempted based on the
qualifications provided by the said standard. The Globe Group’s embedded
derivatives include embedded currency derivatives noted in non-financial contracts.
*SGVMC114676*
- 94 -
28.8
·
Embedded Currency Forwards
As of December 31, 2010, 2009 and 2008, the total outstanding notional amount
of currency forwards embedded in nonfinancial contracts amounted to USD14.65
million, USD9.97 million and USD25.56 million, respectively. The nonfinancial
contracts consist mainly of foreign currency-denominated purchase orders with
various expected delivery dates and unbilled leaselines receivables and payables
denominated in foreign currency. The net fair value of the embedded currency
forwards as of December 31, 2010, 2009 and 2008 amounted to P
=36.51 million
loss, =
P12.18 million loss and P
=38.26 million gain, respectively.
·
Embedded Currency Options
As of December 31, 2010, the Globe Group does not have an outstanding
currency option embedded in non-financial contracts.
Fair Value Changes on Derivatives
The net movements in fair value changes of all derivative instruments are as follows:
2010
At beginning of year
Net changes in fair value of derivatives:
Designated as cash flow hedges
Not designated as cash flow hedges
Less fair value of settled instruments
At end of year
28.9
(P
= 56,151)
(116,679)
(27,631)
(200,461)
25,516
(P
= 225,977)
December 31
2009
(In Thousand Pesos)
(P
=16,642)
2008
=187,815
P
(35,116)
(44,253)
(96,011)
(39,860)
(P
=56,151)
(457,080)
34,265
(235,000)
(218,358)
(P
=16,642)
Hedge Effectiveness Results
As of December 31, 2010, 2009 and 2008, the effective fair value changes on the
Globe Group’s cash flow hedges that were deferred in equity amounted to
=115.83 million, P
P
=22.56 million and P
=40.08 million loss, net of tax, respectively.
Total ineffectiveness for the years ended December 31, 2010, 2009 and 2008 is
immaterial.
The distinction of the results of hedge accounting into “Effective” or “Ineffective”
represent designations based on PAS 39 and are not necessarily reflective of the
economic effectiveness of the instruments.
*SGVMC114676*
- 95 28.10
Categories of Financial Assets and Financial Liabilities
The table below presents the carrying value of Globe Group’s financial instruments by
category as of December 31:
2010
Financial assets:
Financial assets at FVPL:
Derivative assets designated as cash flow hedges
Derivative assets not designated as hedges
AFS investment in equity securities - net (Note 11)
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**
2009
(In Thousand Pesos)
2008
P
=6,255
13,633
101,877
17,613,600
=–
P
36,305
81,727
14,704,734
=–
P
169,012
61,324
14,491,808
171,733
74,132
71,345,737
32,221
60,235
67,520,342
57,260
128,394
57,720,885
* This consists of cash and cash equivalents, short-term investments 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 December 31, 2010, 2009 and 2008, the Globe Group has no investments in
foreign securities.
28.11
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:
2010
Financial assets:
Cash and cash equivalents
Short-term investments
Receivables - net
Derivative assets
Other nontrade receivables*
AFS investment in equity
securities - net (Note 11)
Financial liabilities:
Accounts payable and accrued
expenses **
Derivative liabilities (including
noncurrent portion)
Notes payable
Long-term debt (including
current portion)
Other long-term liabilities
(including current portion)
December 31
2009
Carrying Value
Fair Value
(In Thousand Pesos)
2008
Carrying Value
Fair Value
=5,939,927
P
2,784
6,583,228
36,305
2,178,795
=5,782,224
P
–
7,473,346
169,012
1,236,238
=5,782,224
P
–
7,473,346
169,012
1,236,238
81,727
81,727
61,324
61,324
20,333,340
18,660,131
18,660,131
15,719,340
15,719,340
245,865
–
245,865
–
92,456
2,000,829
92,456
2,000,829
185,654
4,002,160
185,654
4,002,160
50,371,470
52,363,670
45,476,022
45,130,753
36,585,938
37,212,371
640,927
640,927
1,383,360
1,383,360
1,413,447
1,413,447
Carrying Value
Fair Value
= 5,868,986
P
–
8,374,123
19,888
3,481,882
= 5,868,986
P
–
8,374,123
19,888
3,481,882
=5,939,927
P
2,784
6,583,228
36,305
2,178,795
101,877
101,877
20,333,340
* This consists of loan, accrued interest and miscellaneous receivables included under “Prepayments and other current assets” and “Other
noncurrent assets” (see Notes 6 and 11).
** This consists of accounts payable, accrued expenses, accrued project cost, traffic settlement-net and dividends payable.
*SGVMC114676*
- 96 The following discussions are methods and assumptions used to estimate the fair
value of each class of financial instrument for which it is practicable to estimate such
value.
28.11.1
Non-derivative Financial Instruments
The fair values of cash and cash equivalents, short-term investments, AFS
investments, subscriber receivables, traffic settlements receivable, loan
receivable, miscellaneous receivables, accrued interest receivables,
accounts payable, accrued expenses and notes payable are approximately
equal to their carrying amounts considering the short-term maturities of
these financial instruments.
The fair value of AFS investments are based on quoted prices. Unquoted
AFS equity securities are carried at cost, subject to impairment.
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 0.08% to 1.64% (for USD floating loans)
and from 4.37% to 6.55% (for PHP floating loans). The variable rate
PHP loans reprice every six months. 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.
28.11.2.
Derivative Instruments
The fair value of freestanding and embedded forward exchange contracts
is calculated by using the net present value concept.
The fair values of interest rate swaps, currency 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.
Embedded currency options are valued using the simple option pricing
model of Bloomberg.
*SGVMC114676*
- 97 28.11.3
Fair Value Hierarchy
The Globe Group held the following financial instruments measured at
fair value.
The Group uses the following hierarchy for determining and disclosing
the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets
or liabilities
Level 2: other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly or
indirectly
Level 3: techniques which use inputs which have a significant effect on
the recorded fair value that are not based on observable market data.
December 31
2009
(In Thousand Pesos)
2008
P
=101,877
=81,727
P
=61,324
P
19,888
245,865
36,305
92,456
169,012
185,654
2010
Level 1
AFS investment in equity securities - net
Level 2
Derivative assets
Derivative liabilities (including noncurrent portion)
There were no transfers from Level 1 and Level 2 fair value measurements for the
years ended December 31, 2010, 2009 and 2008. The Globe Group has no
financial instruments classified under Level 3.
29. 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 operate and manage
as strategic business units and organize by products and services. The Globe Group presents its
various operating segments based on segment net income.
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. 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.
*SGVMC114676*
- 98 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 is as follows (in thousand pesos):
2010
Wireline
Mobile
Communications Communications
Services
Services
Others
Consolidated
REVENUES:
Service revenues
External customers:
Voice
Data
Broadband
Nonservice revenues:
External customers
Segment revenues
P
=25,970,607
24,451,917
–
P
=2,815,565
3,487,999
5,748,266
P
=–
80,335
–
P
=28,786,172
28,020,251
5,748,266
2,374,542
52,797,066
618,759
12,670,589
–
80,335
2,993,301
65,547,990
EBITDA
Depreciation and amortization
EBIT
31,907,454
(11,734,900)
20,172,554
1,716,592
(6,346,429)
(4,629,837)
(84,928)
(4,510)
(89,438)
33,539,118
(18,085,839)
15,453,279
NET INCOME (LOSS) BEFORE TAX2
Benefit from (provision for) income tax2
NET INCOME (LOSS)
Other segment information
Intersegment revenues
Subsidy1
Interest income2
Interest expense
Equity in net losses of joint ventures
Impairment losses andothers
Capital expenditure
18,768,054
(4,518,236)
P
=14,249,818
(4,661,415)
246,150
(P
= 4,415,265)
(89,919)
–
(P
= 89,919)
14,016,720
(4,272,086)
P
=9,744,634
P
=35,545
(900,760)
168,300
(1,975,932)
(2,968)
(838,169)
(13,982,817)
(P
= 191,933)
(344,899)
28,666
(5,823)
–
(711,279)
(5,478,589)
(P
= 107,080)
–
94
(30)
–
–
(5,467)
(P
= 263,468)
(1,245,659)
197,060
(1,981,785)
(2,968)
(1,549,448)
(19,466,873)
21,802,415
(12,194,022)
(10,171,150)
5,338,255
(4,729,510)
–
7,707
(5,281)
(859)
27,148,377
(16,928,813)
(10,172,009)
Cash Flows
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
1
2
Computed as non-service revenues less cost of sales
Net of final taxes
*SGVMC114676*
- 99 2009
Mobile
Communications
Services
Wireline
Communications
Services
Others
(In Thousand Pesos)
Consolidated
REVENUES:
Service revenues
External customers:
Voice
Data
Broadband
Nonservice revenues:
External customers
Segment revenues
P26,497,050
=
26,736,627
–
P2,794,855
=
3,037,749
3,289,462
=–
P
87,775
–
P29,291,905
=
29,862,151
3,289,462
916,655
54,150,332
501,959
9,624,025
–
87,775
1,418,614
63,862,132
EBITDA
Depreciation and amortization
EBIT
34,499,542
(12,881,171)
21,618,371
1,996,971
(4,495,831)
(2,498,860)
(33,605)
(11,428)
(45,033)
36,462,908
(17,388,430)
19,074,478
INCOME (LOSS) BEFORE TAX2
Benefit from (provision for) income tax2
NET INCOME (LOSS)
Other segment information:
Intersegment revenues
Subsidy1
Interest income2
Interest expense
Equity in net losses of joint venture
Impairment losses and others
Capital expenditure
20,526,499
(5,866,931)
=14,659,568
P
(2,549,049)
501,115
(P
=2,047,934)
(45,315)
2,554
(P
=42,761)
17,932,135
(5,363,262)
=12,568,873
P
(P
=1,046,315)
(1,146,914)
192,620
(2,086,307)
(7,009)
(694,335)
(17,609,324)
(P
=172,625)
(382,422)
38,511
(10,455)
–
(116,625)
(7,086,349)
(P
=57,013)
–
108
(183)
–
–
(6,653)
(P
=1,275,953)
(1,529,336)
231,239
(2,096,945)
(7,009)
(810,960)
(24,702,326)
29,576,009
(16,603,578)
(11,330,388)
3,796,387
(5,215,702)
(12,000)
3,818
(9,824)
(1,331)
33,376,214
(21,829,104)
(11,343,719)
Cash Flows
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
1
2
Computed as non-service revenues less cost of sales
Net of final taxes
*SGVMC114676*
-1002008
Mobile
Communications
Services
Wireline
Communications
Services
Others
(Audited and In Thousand Pesos)
Consolidated
REVENUES:
Service revenues
External customers:
Voice
Data
Broadband
Nonservice revenues:
External customers
Segment revenues
P26,972,026
=
28,434,218
–
P3,087,685
=
1,892,073
2,477,900
=–
P
30,586
–
P30,059,711
=
30,356,877
2,477,900
1,582,653
56,988,897
340,907
7,798,565
–
30,586
1,923,560
64,818,048
EBITDA
Depreciation and amortization
EBIT
36,188,596
(13,638,302)
22,550,294
1,238,778
(3,388,705)
(2,149,927)
(29,329)
(1,061)
(30,390)
37,398,045
(17,028,068)
20,369,977
INCOME (LOSS) BEFORE TAX2
Benefit from (provision for) income tax2
NET INCOME (LOSS)
Other segment information:
Intersegment revenues
Subsidy1
Interest income2
Interest expense
Equity in net losses of joint venture
Impairment losses and others
Capital expenditure
19,601,890
(7,242,264)
=12,359,626
P
(1,798,988)
746,602
(P
=1,052,386)
(31,362)
–
(P
=31,362)
17,771,540
(6,495,662)
=11,275,878
P
=459,577
P
(1,109,632)
300,596
(2,254,107)
(9,728)
(498,227)
14,931,556
=155,665
P
(83,980)
45,326
(1,771)
–
(707,452)
5,442,877
=14,140
P
–
23
–
–
–
7,745
=629,382
P
(1,193,612)
345,945
(2,255,878)
(9,728)
(1,205,679)
20,382,178
22,924,510
(15,711,964)
(6,769,537)
1,981,905
(868,806)
(2,000,000)
Cash Flows
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
1
2
8,228
(507)
(2,340)
24,914,643
(16,581,277)
(8,771,877)
Computed as non-service revenues less cost of sales
Net of final taxes
A reconciliation of segment revenue to the total revenues presented in the consolidated statements
of comprehensive income is shown below:
Segment revenues
Interest income
Other income - net
Gain on disposal of property and
equipment - net
Total revenues
2009
2010
(In Thousand Pesos)
=63,862,132
P
=65,547,990
P
271,806
218,532
1,064,476
856,941
=64,818,048
P
420,425
700,874
608,400
=65,806,814
P
24,837
=65,964,184
P
52,449
=66,675,912
P
2008
*SGVMC114676*
-101The reconciliation of the EBITDA to income before income tax presented in the consolidated
statements of comprehensive income is shown below:
EBITDA
Depreciation and amortization
Interest income
Gain on disposal of property and
equipment - net
Financing costs
Equity in net losses of joint ventures
Other items
INCOME BEFORE INCOME TAX
2009
2010
(In Thousand Pesos)
=36,462,908
P
=33,539,118
P
(17,388,430)
(18,085,839)
271,806
218,532
=37,398,045
P
(17,028,068)
420,425
608,400
(2,182,881)
(7,009)
207,908
=17,972,702
P
24,837
(3,000,391)
(9,728)
40,900
=17,846,020
P
52,449
(2,068,401)
(2,968)
385,301
=14,038,192
P
2008
29.1 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.
29.1.1 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; and
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 revenues generated
from inbound international and national long distance calls and international
roaming calls.
Revenues from (a) to (c) are net of any settlement payouts to international and local
carriers.
29.1.2 Mobile communication data net service revenues consist of revenues from valueadded services such as inbound and outbound SMS and MMS, mobile broadband
data services and infotext, subscription fees on unlimited and bucket prepaid SMS
services net of any settlement payouts to international and local carriers and content
providers.
29.1.3 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.
*SGVMC114676*
-10229.2 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 fixed 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.
29.2.1 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 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;
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.
Revenues from (a) to (c) are net of any settlement payments to domestic and
international carriers.
29.2.2 Wireline data net service revenues consist of the following:
a) Monthly service fees from international and domestic leased lines. This is net of
any settlement payments to other carriers;
b) Other wholesale transport services;
c) Revenues from value-added services; and
d) One-time connection charges associated with the establishment of service.
29.2.3 Broadband service revenues consist of the following:
a) Monthly service fees on mobile and wired broadband plans and charges for usage
in excess of plan minutes; and
b) Prepaid usage charges consumed by mobile broadband subscribers.
29.2.4 Innove 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 3G with High-Speed Downlink
Packet Access (HSDPA) network, the Globe Group offers broadband packages
*SGVMC114676*
-103bundled with voice, or broadband WIMAX 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 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. Value-priced, high speed
data services, wholesale and corporate internet access, data center services and
segment-specific solutions customized to the needs of vertical industries.
29.3
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.
30. Notes to Consolidated Statements of Cash Flows
The principal noncash transactions are as follows:
2010
Increase (decrease) in liabilities related to the
acquisition of property and equipment
Capitalized ARO
Dividends on preferred shares
2009
(In Thousand Pesos)
=2,548,409
P
96,959
50,492
P
=612,613
41,473
–
2008
=870,346
P
95,086
60,637
The cash and cash equivalents account consists of:
2010
Cash on hand and in banks
Short-term placements
P
=944,866
4,924,120
P
=5,868,986
2009
2008
(In Thousand Pesos)
=1,104,231
P
=1,479,948
P
4,835,696
4,302,276
=5,939,927
P
=5,782,224
P
Cash in banks earn interest at the respective bank deposit rates. Short-term placements represent
short-term money market placements.
The ranges of interest rates of the above placements are as follows:
2010
Placements:
PHP
USD
2009
2.00% to 4.25% 2.00% to 5.00%
0.09% to 1.55% 0.05% to 1.63%
2008
2.50% to 6.50%
0.05% to 4.30%
*SGVMC114676*
GLOBE TELECOM, INC. AND SUBSIDIARIES
SCHEDULE A - Short-term Cash Investments
As of December 31, 2010
(In Thousand Pesos)
Name of Issuing Entity and Association of Each Issue
Curr
Principal Amount
Balance as of
December 31, 2010
(In PhP)
Interest Received &
Accrued
(in PHP)
#REF!
#REF!
#REF!
Special Savings Deposit
NO OUTSTANDING BALANCE AS OF DECEMBER 31, 2010
Short Term Investment
TOTAL
USD
PHP
-
-
-
0
0
-
1
GLOBE TELECOM, INC. AND SUBSIDIARIES
SCHEDULE B - Amounts Receivable from Directors, Officers, Employees, Related
Parties and Principal Stockholders
As of December 31, 2010
(In Thousand Pesos)
Name and Designation of Debtor
Balance as of December
31, 2009
Additions
Collections
Adjustments
Balance as of
December 31, 2010
Receivable from employees:
Medical, salary and other loans (see B.1)
82,184
82,184
334,996
334,996
(345,913)
(345,913)
(4,824)
(4,824)
66,443
66,443
2
GLOBE TELECOM, INC
Schedule B.1 - Hospitalization, Medicines and Others
As of December 31, 2010
Last Name
ABAD
ABADA
ABADILLA
ABAGAT
ABALOYAN
ABANA
ABARENTOS
ABARQUEZ
ABAYON
ABEL
ABELLA
ABENOJA
ABLAZA
ABUEL
ABUNDO
ACOSTA
ADAME
ADAN
ADRE
ADRIATICO
AESQUIVEL
AGDIPA
AGIDA
AGRAAN
AGUILAR
AGUILAR
AGUILAR
AGUILAR
AGUIRRE
AGUIRRE
AGUSTIN
ALAN
ALANO
ALAO
ALARCON
ALARCON
ALBANO
ALBARILLO
ALBERTO
ALBERTO
ALBINA
ALCALA
ALCANTARA
ALCANTARA
ALCANTARA
ALCANTARA
ALCOVINDAS
ALDAY
ALDEGUER
ALDOVINO
ALEJANDRO
ALEMANIA
ALINSANGAN
ALLADO
ALLAS
ALMAZAN
ALMENDRAS
ALMINE
ALMOCERA
ALMORADIE
ALTERO
ALVARADO
ALVAREZ
ALVAREZ
ALVAREZ
ALVAREZ
ALVERO
ALVERO
ALVIR
ALZONA
AMANTE
AMARILLAS
AMAT
AMAT
First Name
AILENE JOY
JAY
EDGARDO
ADREANNE
WENDELL
VENER
GLENDA
ROSEMARIE
ELOISA
MARK ALEXANDER
FIDEL
MELANIE
CHRISTINA
SARA DANE
NITELA GRACE
FELIXBERTO POCHOLO
ARMANDO
ROMEO
ELISEO
CECILE
RAMON NONATO
JONATHAN
FERDINAND
ALMA
VILDA GRACE
CHRISTINE
MARY RUTH
JONALYN
JOMEL
MARA GISELA
DONABELLE
FATIMA
CHARRIE MYN
OFELIA
MA. ISABELITA
SHADRACH
DENNIS CHRISTOPHER
HONORATO
EUGENE JOSEPH
JULIE ANNE
IAN HIPOLITO
JIMMY
MARIA CLAVEL
CAMILLE CORNELIA
GINA
RAPHAEL NINO
CHRISTOPHER
WARREN
FENINA ANTONIA
ROMEL
LEMUEL
ANGELICA
NIEVA GAY
ROMULO
MARIA CORAZON
BERNARDO
CHRISTOPHER
DULCE AMOR
GINA
ALAN
JANICE
MARY ANN
SALVACION ADELINA
MARINA MELISSA
EVANGELINE
NOEL
RHOUCHELLE ANN
RENNEL
ALLAN
MELODY
ALONIE
JOEL
MA. CORAZON
LEO
Amount
11,000
71,287
39,667
36,250
40,000
25,000
12,137
52,292
19,083
38,204
12,044
19,675
47,500
19,937
16,000
41,773
40,954
30,167
108,000
161,936
76,851
10,740
17,406
12,471
10,000
54,000
61,774
104,167
10,000
44,485
13,092
50,000
87,500
73,333
13,983
56,250
79,952
86,682
13,028
17,488
22,500
57,330
12,040
15,067
23,057
28,931
35,111
10,933
18,667
40,792
49,301
22,917
28,333
19,405
89,254
156,035
32,083
46,756
22,440
25,000
39,090
54,083
13,000
20,545
41,667
68,750
20,000
24,750
20,000
141,000
27,083
13,663
35,417
89,375
3
Last Name
AMBAGAN
AMBOS
AMOG
AMOR
AMORES
AMORIN
AMPARO
AMURAO
ANASTACIO
ANCHETA
ANDUYAN
ANEL
ANG
ANGEL
ANGELES
ANGELES
ANIMAS
ANOG
ANONUEVO
AÑORA
ANOTA
ANSUS
ANTONIO
APOLINARIO
APOLTO
APUANG
AQUINO
AQUINO
AQUINO
AQUINO
AQUITANIA
ARAGO
ARAGON
ARAN
ARANETA
ARANETA
ARAT
ARBAN
ARBULANTE
ARCA
ARCADIO
ARCEGA
ARCEO
ARCEO
ARCILLA
ARELLANO
AREVALO
AREVALO
ARGANDA
ARGUELLES
ARGUELLES
ARIAS
ARINES
ARISTORENAS
ARQUELADA
ARRECO
ARRIOLA
ARROYO
ARROYO
ASENTISTA
ASENTISTA
ASIGNAR
ASUNCION
ATIENZA
ATIENZA
AUJERO
AUSON
AVELINO
AVERION
AVERION
AVILA
AVILA
AVILA
AVILES
AYANGCO
AYLLON
AZANZA
AZARRAGA
AZUCENA
BABASA
First Name
LORELIE
MARVIN
RHONELL
DARWIN
ARVIN
MARLITO
FENEE MARIE EVELYN
ARNEL LLANDER
NORINA
JOSEPH
EDWIN
MICHELLE
CATHERINE
CHARMALOU
ROWENA
RODELIZ
RANDY
JESSE REY
ROY VICTOR
ARGIE
GINALYN
MARY GRACE
MA. LEONORA
DAX CESAR
MARIA GLENISE
ROSEMAE
CHRIS VINER
ALMA
EVANGELINE
RONNIE
NOEMI
ALBERTO
CHED AUGUSTUS
AURORA
MIGUEL EMMANUEL
PHILIP JAMES
JOYCE
MARINELLA
SHEILA
BEN
MA. NIMFA
ERIC
SANTIAGO
LORLYN
MARISSA
CHANDA
RITCHIE
ROBERTO
SARA JANE
ELSIE
MARIVIC
MARIA PATRICIA
MA. VICTORIA
ROSALYN
JOANNE FABIANNE
CHRISTOPHER
CHARLIME
LOYOLA
LEILA
REY
MARITA
MARICEL
LAWRENCE
EDUARDO
VINCENT
ARIEL ANTHONY
GALLARDO
RICARDO
ANGELITO
AILENE
PAUL
JESSIE
JANETH
ARTEMIO
MARIA VERONICA
JOSEPH ANTHONY
LOUISA
MARK PHILIP
IMELDA
ALVIN
Amount
76,000
17,000
36,335
20,067
115,500
12,897
133,333
20,772
26,836
44,250
14,550
11,202
87,500
16,235
13,333
17,927
25,000
10,185
16,575
102,833
77,188
60,100
103,542
10,211
25,000
22,000
17,744
24,876
29,792
97,125
29,657
15,000
33,679
26,263
23,833
31,210
25,365
18,219
13,218
22,917
12,708
56,667
11,511
49,310
38,000
43,370
27,840
38,026
20,625
15,417
40,000
56,250
22,435
18,750
35,108
50,000
23,125
17,227
72,042
31,469
33,333
15,625
12,000
13,750
22,917
12,500
68,750
550,000
20,000
230,000
10,500
23,345
26,667
22,500
12,500
44,614
17,292
16,667
14,625
48,167
4
Last Name
BABINA
BACALING
BACO
BACULIO
BADILLA
BAG-O
BAHENA
BAJAR
BALANCIO
BALBASTRO
BALDERAMA
BALEROS
BALINADO
BALTAO
BALUYUT
BANAGA
BAÑARES
BANCOLETA
BANDA
BANDALA
BANTILAN
BANZON
BARABONA
BARBAIRA
BARCELLANO
BARCELONA
BARCELONA
BARCENAL
BARRAMEDA
BARREDO
BARRETTO
BARTOLOME
BARTOLOME
BARTOLOME
BASCARA
BASILAN
BASILIO
BASILLA
BASTES
BATAC
BATALLA
BAUTISTA
BAUTISTA
BAUTISTA
BAUTISTA
BAUTISTA
BAUTISTA
BAUTISTA
BAYLE
BAYLOSIS
BAYONA
BAYONITA
BAYOT
BAYSA
BELANGEL
BELANO
BELEN
BELEN
BELGIRA
BELLEZA
BELULIA
BENASA
BENERAYAN
BENI DY
BENITEZ
BENITEZ
BENITO
BERBA
BERBA
BERBA
BERBISCO
BERGAVERA
BERNAL
BERNALES
BERNALES
BERNARDINO
BERNARDO
BERSAMINA
BESA
BIAZON
First Name
MOISES
CHERRIELYN
REY
ALEXANDER
JONAH MARIE
MERRY KRISTINE
MARY ANN
JOSE VITTORIO
PEDRO JR.
LEILANI
CESAR
PHILIP HERSON
FERDINAND
PAOLO EUGENIO
CHERYL
ANGELITO
LIZA
SERGIO
MARIE ANTONNETTE
BENETH
ROSELLE
MELISSA
JEFFREY
SABRINA
JENNYBEL
MARIA KARLA
MA LOURDES
MARINOR
MA. BELLA
CATHERINE
DOMINIC
JANICE JILL
ROBERT BRYAN
ANA MARIE
CARMELO
JOVY GAY
RODOLFO
MARIA JOCEN
HERNANDO
CECILIA
PHILIP
MICHAEL
DEXTER
CONSOLACION
MARLON
MA. LOURDES
BENJAMIN
DIONNETTE
JOWIE
CHRISTIAN
FRANCIS
GENEROSO
ANNE CLAIRE
JENNIFER
CHRISTINE
MICHELLE
ALEXANDER
BENJAMEN
ANNALYN
CHARISMA MICHELLE
EMILIANO
MICHAEL RAY
JUNFOR
MARIA CAROLINA
MICHELLE
SHEILA MARIE
VENERANDO
VINCENT CHRISTOPHER
BENJAMIN
EDGARDO
RODELYN
ENRIQUE
MA. ISABELITA
FELIZARDO
MAXIMO
BRIAN
RAQUEL
ROGELIO
MELISSA
LLEWELLYN MOISES
Amount
59,800
27,767
36,714
32,088
38,242
64,602
43,750
75,000
40,000
16,000
29,167
40,853
32,528
412,500
23,333
75,000
22,220
20,833
26,359
13,660
57,750
16,168
35,417
10,757
36,630
16,000
20,000
61,875
22,917
16,667
80,317
10,000
15,458
22,917
36,000
27,500
37,220
21,192
31,893
53,863
10,000
17,071
17,500
18,374
23,874
33,333
44,426
100,833
25,000
30,000
25,000
21,969
32,417
30,743
17,898
14,138
45,000
95,000
12,500
87,500
29,250
42,500
10,000
19,500
63,702
78,144
27,000
19,279
24,375
33,786
11,667
43,750
72,167
37,500
113,333
20,813
17,540
18,750
58,279
202,741
5
Last Name
First Name
BIEN
LODEVICA
BIGLETE
CARLITO
BIGORNIA
GERTRUDES
BILLONES
JOSEFINA
BILUAN
JANBERLY
BISQUERA
JACYL LOYCE
BITO
JESUS
BOADO
ODETTE
BOC
JONATHAN
BOLTRON
ERNEZAR
BONDOY
ROMMEL
BONES
BALTAZAR
BONITES
GERALDINE
BONTILAO
ANTONINO
BOQUIREN
SYLVIA
BORBON
LORENA
BORCENA
NELSON
BORCILLO
WILFREDO
BORDON
LEDILLA
BORROMEO
SHALIE
BOTE
MELANIE
BRAGA
JORGE
BRAGAS
ELMER
BRAVO
JIMMY
BRECIO
IVY ROSE
BRITANICO
FERDINAND
BROSAS
ELBERT
BRUNIDOR
RYAN
BUENA
ARLENE
BUENAVENTURARAUL
BUENAVENTURAJENNIFER
BUENVENIDA
JOSIE
BUGAOAN
BERNADETTE
BUNACHITA
SANTOS
BUNAG
MELANIE ROSE
BURGOS
AILEEN
CABAGUE
LARRY
CABALATUNGANCONNIEL REY
CABALLERO
ALVIN
CABALSI
KAREN
CABANERO
ARNEL
CABANTING
FRANCISCO
CABARILLOS
JASON
CABEZAS
NONITA
CABILDO
ENRICO BERNARDINO
CABILUNA
MELISSA PAULA
CABILUNA
ELEUTERIO SHANE
CABORNAY
AGNES JOY
CABUSAS
RALPH JOEY
CACHO
DARLEY DAPHNE
CADATAL
HEHERSON
CADIZ
MARK
CADO
BRIGETH
CAFE
KAREN
CAGAANAN
SUZETTE
CAIPANG
MA. LOURDES
CAIPANG
CLINTON
CAIRO
JOEL
CAIRO
RICHARD
CAJIGAL
JANRY
CALABROSO
FILOMENO
CALABUCAL
MARIA RAMONA DAY RIO
CALALAY
GILBERT
CALDERON
DESIREE
CALDERON
GILBERT
CALIBARA
EDWIN
CALLO
JHERYL JOHN
CALLOS
JIMMY
CALMA
MARIA THERESA
CALOSING
CHERRYLIN
CAMACHO
MA. VICTORIA
CAMACHO
MA. SHEILA
CAMACHO
MA. ERNA
CAMANTIGUE MICHAEL
CANARIAS
SARAH
CANETE
JEROME
CAÑETE
VICTOR
CANILLAS
RAMIL
CANIZARES
JOSEPHINE
CANONG
CYNTHIA
Amount
54,083
39,375
18,000
41,250
11,667
17,500
57,002
12,800
66,000
38,031
41,250
29,396
20,939
14,502
55,417
21,492
58,338
12,212
10,625
21,064
10,604
49,333
36,989
29,321
20,000
15,867
32,083
12,546
29,909
32,196
99,006
40,000
22,917
42,981
16,875
57,237
26,118
65,000
32,275
15,187
30,000
11,667
37,445
75,000
28,133
20,175
20,493
20,000
12,554
20,000
54,750
55,000
37,083
11,545
22,917
15,000
29,167
22,500
31,667
37,500
32,045
28,084
17,967
25,000
39,023
45,225
32,083
15,855
37,500
20,000
14,378
18,333
18,750
15,000
27,923
30,000
32,500
27,417
48,125
26,250
6
Last Name
First Name
CANORA
EDWARD
CANTORNA
ELOISA
CANTOS
DONALD
CANTOS
OLIVER
CAPATI
ROMAN
CAPISTRANO MARIEL
CAPULE
LORENA
CAPULONG
ROSARIO
CAPUNO
RUBY ANN
CARAG
BENIGNO
CARANDANG
LARISSA
CARANDANG
ALEJANDRO
CARANDANG
MELCHOR
CARDENAS
MALYN
CARIAGA
MARY GRACE
CARIASO
DENNIS
CARPIO
BASILIO PONCIANO
CARRULLO
PHOEBE
CASACLANG
DONATO
CASAYURAN
JOYNA
CASIDO
NERRIZA
CASINO
MANUEL
CASTILLO
ROWENA
CASTILLO
RICHARD
CASTILLO
CECILIA GRACE
CASTRO
ANNA LEA
CASTRO
MA. HAZEL
CASTRO
PRISCILLA
CASTRO
KAREN CLAIRE
CASTRO
JEROME JIREH
CASTRO
REYLEN
CASTRO
CRISTY
CASTRO
KRIS JOHN
CASTRONUEVO MARK VON JOSEPH
CASUPANAN
ROMINA
CATAP
ALFREDO
CATIBOG
DANILO
CATIIS
TITO AUGUSTINE
CATIVO
RANDY
CAUTON
MARIA LUISITA JEAN DONA
CAVE
RONNIE
CEDENO
ROCARLEO JUNO
CELOCIA
EMMANUEL
CENIT
CLAUDEN
CENIZA
ANA THERESE
CENIZA
LYNETTE
CENIZA
HENRY
CENTENO
MINERVA
CERDIÑO
GENEVIEVE LEIGH
CERVALES
ADELPHA
CERVANTES
GILBERT
CHAN
CHARLES BENEDICT
CHAN
EDILYN
CHAN
JESSE
CHANCO
JOANE
CHUA
ANNE THERESE
CHUA
CYRIL
CINCO
SHEILA MARIE
CINO
JULIUS CAESAR
CIOCON
MARIA SHARON
CIPRES
ROBERT
CLAUDIO
JOSELITO
CLEMENTE
GEORGE CARMELO
CLEMENTE
JANNETTE
CLIDORO
MARIEL
CLORES
GLENN MARK
CO
MICHELLE RENEE
CO
JOANNE
CO
REDENTOR
COBAR
ROVI
COLUMBRETIS AINAH ROSE
COMLA
RACHELLE
COMODA
GERRY
CONCEPCION DONNA BEATRICE
CONCEPCION MARIA CRISTINA
CONCEPCION JOLLY
CONCEPCION RUBEN
CONCHA
MEILARNI
CONSTANTINO VIRGILIO
CONTI
HANNAH JEAN
Amount
21,448
21,213
13,333
18,870
14,382
15,601
87,823
13,125
25,000
17,500
18,750
26,333
37,500
15,625
29,583
38,456
31,246
10,938
44,357
17,500
39,497
423,992
17,117
56,180
70,535
12,375
15,435
20,000
37,500
37,715
56,519
57,625
138,750
38,074
16,042
13,867
15,000
22,804
53,567
18,000
166,667
46,521
36,384
40,660
15,741
25,901
45,000
19,000
35,324
44,647
13,213
18,190
27,000
53,625
65,000
13,983
45,603
17,657
11,250
26,901
27,000
30,000
18,750
35,575
27,602
29,167
10,878
10,977
58,887
10,038
27,907
37,148
68,470
17,195
17,500
28,333
39,068
52,830
76,401
52,867
7
Last Name
CORBILLA
CORLONCITO
CORNELIO
CORONADO
CORONADO
CORONEL
CORPUZ
CORPUZ
CORTEZ
COSCA
CRISOSTOMO
CRISOSTOMO
CRISTOBAL
CRUCILLO
CRUTO
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CRUZ
CUADRADO
CUALBAR
CUARESMA
CUARESMA
CUARTE
CUASAY
CUDALA
CUETO
CUEVAS
CUEVAS
CUEVO
CUEVO
CUNANAN
CUSTODIO
DA COSTA
DACILLO
DADOR
DAGA
DAGAN
DALANGIN
DANGAN
DANTES
DATINGUINOO
DATU
DATULAYTA
DAVID
DAVID
DAVID
DAVID
DE BELEN
DE CASTRO
DE CASTRO
DE CASTRO
DE GOITIA
DE GUZMAN
DE GUZMAN
DE GUZMAN
DE GUZMAN
DE GUZMAN
DE JESUS
DE LA CRUZ
DE LA PAZ
DE LEON
DE LEON
DE LEON
DE LOS REYES
DE MESA
DE QUINTO
First Name
JOSE GLENDO
GINA
RICO
EDWIN
XERXEZ APRONIANO
SERGIO
CHARINA
ROWENA
MARICON
ROSALYN
EDEN
CRISTINO
CHRISTINA NAOMI
MANUEL
JOYCE APPLE
ENRIQUE
MICHAEL JOSEPH
MA. SUZETTE
EDILON
HILDA
DENNIS
RAYMOND
MARIE GAIL PAULINE
GABRIEL RESURECCION
GLOVELYN
GOLDA MEIR
NORMAN
KAREN
CIRIACO
OLIVER
RONALDO
FERNANDO
CLARISSA
THERESA
MELY BERNARDA
GUISEPPE
KATHLEEN
RODERICK
ROGELIO
MELITA
SALVE
CECILIA
ANNE LALAINE
ANNIE LORAINE
MARY ELLEN
ISAGANI
JOEL ANDREW
DAX
EMMANUEL
MA. GRACIA
OMAR
LORETO
ARNIE MAE
JENNIFER
JERONIMO DUNSTAN
JEROME JACOBO
JUNJIE
BIENVENIDO
GERARDO
BENJAMIN
NORMAN THEODORE
DARWYN
MARIA VICTORIA
BERNARD
CORAZON
RODRIGO MARTHIN
MICHAEL
MACLENIN
JOSEPHINE
JOEL
MICHAEL IAN
NOEL
ROGELIO
ROLANDO
JAY JAY
FREDRICK ELLIS
THOMAS JEFFERSON
EDLIN JOSE
LUISA
MAUREEN
Amount
15,000
22,491
13,750
27,292
37,500
20,833
30,000
83,081
17,987
20,000
33,333
62,598
22,021
23,687
13,974
11,317
13,012
15,177
16,667
16,875
20,090
20,583
21,667
25,000
25,034
29,167
31,250
32,389
33,575
44,333
62,500
76,992
133,540
24,167
46,968
86,391
10,000
15,611
15,270
37,917
20,208
68,750
61,038
87,115
26,441
60,000
23,219
16,015
80,000
30,728
49,722
30,234
12,956
49,222
33,333
29,750
63,903
23,562
26,667
27,500
31,250
11,352
22,917
48,333
112,917
67,157
25,000
42,058
54,167
54,360
57,468
47,917
39,583
22,333
27,044
33,333
221,000
46,400
25,000
19,875
8
Last Name
First Name
DE TORRES
MARICAR
DE TORRES
JENEFER
DECENA
KAREN JEANNE
DECLARO
GLENN
DEGUZMAN
JUN
DEL MUNDO
CECILIA
DEL ROSARIO ARLENE
DEL ROSARIO MA. EUGENIA GERTRUDES
DEL ROSARIO DANTE
DEL ROSARIO MICHAEL
DEL ROSARIO CECILIA
DEL VALLE
JAY
DELA CRUZ
CATHERINE
DELA CRUZ
PATRICK JOHN
DELA CRUZ
ROCHE
DELA CRUZ
CHARLES MORRIS
DELA CRUZ
ERRVIC
DELA CRUZ
DIERDRE
DELA CRUZ
MA. ELINORE
DELA CRUZ
KEVIN
DELA CRUZ
SHEILA MARIE
DELA CRUZ
PETER RONALD
DELA CRUZ
PAOLO
DELA LLANA
ARNOLD
DELA PAZ
MYLENE
DELA PAZ
MYLENE
DELA PAZ
ALFRED MICHAEL
DELA PEÑA
VIVIEN
DELA ROSA
KRYSTAL
DELA ROSA
MARSHA
DELA VEGA
JOHN RON
DELGADO
MARY JANE
DELGADO
DARIUS JOSE
DELICA
SHIRLEY
DELLEVA
MARCELITO
DELLOSA
MA. LUZ FATIMA
DELMENDO
RODEL
DELMIGUES
ROMULO
DELOS REYES PATRICIA
DELOS SANTOS JESSICA ANNE
DESPOJO
RAY
DETCHING
DANILO
DETERA
NOLAN
DIAMITAS
ALEXANDER
DIAZ
MAUREEN
DIAZ
PAOLO
DICANG
MARRA LIND
DIMACULANGANNOEL
DIMACULANGANERWIN
DIN
JOSEPH
DIN
ROSE MARIE
DINO
ROMINA PAULA
DIOLASO
MARIA LYN
DIOMAMPO
JOSE ANTONIO
DIONGZON
ELAINE
DIONISIO
FREDERICK
DISEPEDA
EDWIN
DISTURA
MARITES
DISUANCO
HOYLE RAUL
DIVINAGRACIA ANGIE
DIZON
JENNIFER
DIZON
CATHERINE ANNE
DOBLE
ARNULFO
DOCENA
ALFREDO
DOCTOR
VANESSA
DOLOR
HUMPHREY
DOMINGO
RICARDO
DOMINGUEZ
EDWIN
DOMO-ONG
KATHLEEN FATIMA
DONATO
CHERYL
DONATO
CINDY
DORADO
IREEN
DORAN
GRACE CECILIA
DRILON
ANNABELLE
DUEÑAS
MARIA RITA PAZ
DUGAY
MARIA ROWENA
DUGENIA
JONATHAN
DULAY
EDMUND
DUMIGPE
ROMULO
DUNGO
LUISITO
Amount
14,458
15,625
10,833
31,628
105,117
316,250
11,598
15,833
16,042
41,250
46,487
110,833
11,500
11,871
12,500
14,891
18,750
20,833
29,167
31,667
56,667
85,801
240,208
22,500
10,702
18,750
77,833
26,467
17,650
57,385
35,944
14,629
118,452
10,833
16,667
22,083
30,000
40,000
40,438
156,667
28,303
31,176
13,125
26,250
18,674
20,000
16,919
18,112
21,276
35,208
58,988
121,875
16,042
148,958
20,827
15,000
17,500
13,260
199,450
10,500
11,250
64,821
24,962
12,500
13,187
140,000
45,833
39,923
34,292
30,027
90,060
93,750
17,791
10,000
35,862
35,426
22,900
25,000
43,785
79,527
9
Last Name
DURAN
DY
EATA
EBAL
ECARMA
ECLE
EDADES
EDUSADA
EGBALIC
ELEAZAR
ELGAR
ENCANTO
ENDRIGA
ENRIQUEZ
ENRIQUEZ
ERACHO
ERESTAIN
ERGINO
ERGUIZA
ERMAC
ESCALONA
ESCAREZ
ESCATRON
ESCOBAR
ESCOBIO
ESGUERRA
ESLAVA
ESPERAS
ESPERAS
ESPINA
ESPINOLA
ESPINOSA
ESPINOSA
ESPIRITU
ESQUILLO
ESTANDARTE
ESTANISLAO
ESTO
ESTRADA
ESTRADA
ESTRADA
ESTRELLA
ESTRELLA
EUGENIO
EVANGELISTA
EVANGELISTA
EVANGELISTA
EVARISTO
EVIO
FABELICO
FAJARDO
FAJUTAGANA
FAJUTAGANA
FALCIS
FAMADOR
FARGAS
FAROL
FAUNILLAN
FELIX
FERAREN
FERIA
FERNANDEZ
FERNANDEZ
FERNANDEZ
FERNANDEZ
FERNANDEZ
FERNANDEZ
FERNANDEZ
FERNANDO
FERNANDO
FERNANDO
FESTIN
FIDELINO
FIGUERRES
FILIPINAS
FINEZ
FIRMALO
FLOR
FLORENDO
FLORENDO
First Name
GIGI
RYAN
SIEGFRED MANUEL
CONSORCIO
EDWIN
DONN EVANS
ELEANOR
NORINA
GARRY
CROMWELL
SHIRLEY
MARLON
MARIGOLD
ANNA MARIE
CHITO
ELMER
RYAN CLINT
DOREEN ANN
RICKY
MAJARLIKA LOU
MICHAEL
RODEL
ARNEL
FRANCISCO
GLADYS
GENER
ANGELO
MELVIN
CHERRY
LINA
ARNOLD
OLIVER
PAULINO
JUSTINIANO
MARIA JOYCE
MICHELLE ANN
JEDREK
MARIE ANNE AIDA
ARNEL
FEDERICO
RICKY
JONATHAN
FRIDAY JAN
JOHN EUGENE
MELANIE
ANTONET
BEHN JAESON
GILBERT
JONATHAN
SHARON
MARJORIE
MARIANITA
ROBERTO
FEDERICO
CYRELLE VINCENT
JAIME
JAY ALBERT
ROMEO
JENNY
JOJI VISSIA
RICHARD NEAL
FERDINAND
ADRIAN JOSEPH
EDMUND
LUIS RODRIGO
RODRIGO
ROSEMARIE
VHIC MHARR
GINA
MICHAEL
ANITA
DANNY
ARTURO
VENANCIO
ROLANDO
MA. THERESA
ANNA MARIEL
ERNESTO
CHERYL
HARRY
Amount
30,743
12,668
27,500
16,667
32,083
12,500
150,000
70,000
28,000
18,578
22,177
51,222
47,102
81,542
102,695
18,958
63,348
26,801
37,500
15,000
30,000
34,427
30,625
38,333
11,667
21,929
37,625
25,833
26,250
48,871
39,346
11,458
118,846
28,807
115,284
98,556
20,886
16,667
35,258
60,891
129,814
21,852
36,056
25,000
13,333
34,167
78,125
44,500
33,500
21,224
15,250
14,000
22,642
27,083
87,500
80,000
25,769
30,771
18,793
30,000
35,260
12,009
20,803
24,440
26,280
27,551
47,500
59,702
15,125
16,042
20,690
17,714
46,722
103,333
75,500
65,833
39,583
13,131
21,016
58,333
10
Last Name
FLORENTINO
FLORES
FLORES
FLORES
FLORES
FLORES
FORMOSO
FORMOSO
FRAGINAL
FRANCISCO
FRANCISCO
FRANCISCO
FRANCISCO
FRANCISCO
FRANCISCO
FUNTANAR
GABASA
GABATANGA
GABATANGA
GABRIEL
GADAINGAN
GADOR
GAGUA
GALAPON
GALICIA
GALIGUIS
GALLARDO
GALLEVO
GALO
GALVERO
GALVEZ
GAMBAN
GAMBOA
GAMOS
GAN
GAN
GANELO
GAPAS
GARAIS
GARCES
GARCIA
GARCIA
GARCIA
GARCIA
GARCIA
GARCIA
GARCIA
GARCIA
GARCIA
GARCIA
GARDOSE
GASMIDO
GASTON
GATCHALIAN
GATUS
GAVINO
GAVITO
GAYAMO
GAYANES
GAYOSO
GAYTA
GELERA
GENITA
GENTALLAN
GERALDES
GERMANO
GERON
GERONIMO
GIANAN
GIANAN
GILBUENA
GIMAY
GO
GO
GO
GO
GO-BASQUENA
GOCE
GOHETIA
GOMEZ
First Name
LIONEL REIDBEL
ELMIRA
ADONIS
MA. THERESA
MARIA ROSA ISABEL
LEONIDA JASMIN
MICHAEL
MA. TERESA
JAIME
JASMINA
MARICEL
MARIA LUISA
ARNOLD
ALEX
MA. CARMEN
GENARD
MARIE MICHELLE
FRETI
LIHEART
AYNA LOU
JOSE ROGER
ZINIA
FELICISIMO
SAMUEL
ANN SALVACION
MA. THERESA ANGELICA
REGINA
MARIE ROSE
LOVELYN
GENELYNN DIMPLE
MAYETTE
JOSE ERWIN
VALERIE ANN
MA. REGINA
SHERRY
BERNARD ERIC
GARY
MARIECHELLE
GARIZALDY
GLENN
RICO PAOLO
FERNANDO
RENATO
RESTITUTO
JOMEL
JO-ANNE
RAY PATRICK
VERNA TERESITA
BENJAMIN
BENJAMIN JOSE
MANUEL
GERRILYNN
JONABETH
JOSEPH
ARTURO
DARWIN
RAYMUNDO
JOELINE
MARY ANN
MARIA LUZ
MELVA
DARLENE CHUCHI
JONALYN
JULITO
ROLAND JOSEPH
JENEFFER
ROMMEL
JOEL
MARIFE
MARIE MAY ABIGAIL
ALAN
JOB
MARY LOU
RENE MARTIN
CHRISTINE
GRISELDA
MA. VANESSA
SIENA
JESSIE
RENER
Amount
16,125
20,462
45,188
50,000
52,030
52,500
15,000
17,749
65,000
10,867
14,086
18,054
20,539
20,625
82,729
29,167
12,500
35,073
35,750
22,500
42,000
30,000
333,479
18,333
28,000
11,250
16,875
180,000
21,250
28,333
16,181
32,000
56,583
29,635
25,208
128,500
100,353
11,250
66,667
91,667
13,947
20,000
25,000
26,250
27,530
32,500
43,886
44,215
70,250
84,323
25,146
33,333
28,252
104,167
203,819
24,750
26,250
20,625
11,594
50,583
16,125
14,583
127,708
67,083
27,500
14,667
27,083
41,316
11,307
18,504
28,750
20,000
11,458
22,917
23,392
227,083
26,200
17,819
16,125
16,250
11
Last Name
GOMEZ
GONGORA
GONZALES
GONZALES
GONZALES
GONZALES
GONZALES
GONZALES
GONZALES
GONZALES
GONZALES
GONZALES
GONZALEZ
GONZALODO
GORDON
GOROSPE
GO-SOCO
GRANADA
GRATE
GRATELA
GREGORIO
GREGORIO
GUANLAO
GUARDIANO
GUARDINO
GUCE
GUDAO
GUDY
GUELAS
GUERRA
GUERRERO
GUEVARA
GUEVARRA
GUEVARRA
GUEVARRA
GUIAO
GUILLERMO
GUIMARY
GUMARU
GUTIERREZ
GUTIERREZ
GUTIERREZ
GUTIERREZ
GUTIERREZ
GUTIERREZ
HABASA
HABULAN
HANOPOL
HANS
HARILLA
HARMOND
HAW
HEBRONA
HERMOGENES
HERNANDEZ
HIDALGO
HINLO
HIPOLITO
HONRADO
IBAÑEZ
IBARRA
IBAY
IGLIANE
IGNACIO
IGNACIO
IGNACIO
ILAGAN
ILAGAN
ILAGAN
ILETO
INAJADA
INAJADA
INDAPAN
INFANTE
INOCANDO
IRIOLA
ISIP
ISLA
ISRAEL
JABRICA
First Name
RYAN
EDMUND
JAYME
JAY
JOHN NEIL
ALLAN JAY
RAYMOND ANGELO
LUDOVICA
IMELDA NICHOLASA
DOMINGO
JAIME
HERSHEY
EDUARDO
JOSE
MANUEL
REY
JOSEFINA
DOROTHY
IMELDA
ROWENA LORETA
LIVERN
SHANETTE
EVANGELINE
RAQUEL
FIDEL ANDREI NINO
JENNIFER
SANTOS
MA. GILDA
ESTELITO
NAZARIO
MIKAEL ANGELO
GERARD
KARREN
MARISSA
AIREEN
ERIC
DELIA
RANDY
ANTHONY ALEXIS
DENNIS
JEMAR
CHERYL
IMEE
EDILBERTO
ROWENA
REYNALDO
KARLA
ALEXANDER
JOSEPH FREDERICK
ALVIN
JEROME
JENNIFER
RICHARD DANJE
MICHAEL MARTIN
MARCELLUS ANTHONY
LILETH
CRISTINA
ROEL
JOSEFINA
MARIFLOR
JOCEL
MALEHA
ARNEL
JOHANNA
JASMIN
VICTOR ANTONIO
JOANAH GRACE
RAYMUNDO
EDGARD
RAFAEL CONRAD
LUCIO
EDGARDO
ELCID ANTHONY
JOSEPHINE
EDWIN
SALVADOR
ALVIN DALE
JOSEPH
EDWIL
ANNA LOREN
Amount
39,207
29,000
10,000
13,333
13,583
20,625
22,257
22,917
23,333
35,115
43,910
58,794
98,288
47,917
36,667
34,777
27,323
27,000
52,389
20,417
32,916
49,167
19,571
42,000
51,542
11,872
122,737
28,000
16,385
23,129
13,917
70,000
13,750
14,000
18,000
30,819
36,565
30,822
33,333
11,389
18,117
22,917
23,956
32,187
80,833
34,500
27,083
25,000
42,500
75,000
10,500
59,434
16,500
21,409
133,949
11,960
35,568
12,500
68,258
31,875
37,500
71,058
20,625
19,167
87,108
159,420
32,917
53,000
66,061
37,641
80,000
131,125
51,216
33,750
28,513
36,666
24,125
134,219
19,465
11,458
12
Last Name
JACILDO
JACINTO
JACOB
JAEN
JAKOSALEM
JALA
JALECO
JALLORINA
JAMILANO
JAUDIAN
JAVIER
JEREZ
JEREZA
JIMENEZ
JORDA
JOSE
JOSE
JOSUE
JOSUE
JOSUE
JUCAL
JULATON
JUMALON
JUMONONG
JURILLA
KARNANI
KATIGBAK
KHO
KINTANA
LABAYANDOY
LABIO
LABRADO
LABRE
LACONICO
LACSAMANA
LACSON
LADERA
LAGAMON
LAGPAO
LAGUDA
LAJA
LAJUM
LAM KO
LAMBON
LAMPA
LANIBA
LANIT
LANSANG
LANTACA
LAO
LAPURGA
LARANAN
LARIOS
LASTIMOSA
LATOJA
LATONIO
LAURENTE
LAWAS
LAYCO
LAYNESA
LAZARO
LEE
LEE
LEGASPI
LEGASPI
LEONOR
LEOPOLDO
LEUNG
LIBAO
LIBRON
LIGASON
LIM
LIM
LIM
LIM
LIM
LIM
LIMQUECO
LINDAYAO
LING
First Name
RICKY
MARIANNE
RODOLFO
REGGIE
SEGUNDO
JOJIE
JOSEPHINE
SHERRILL
VIDELIO
JENETTE
MA. BERNADETTE
ROQUILLO
JOSE RAMON GERARDO
JELINA
MARY DAPHNE
FRANCE MARIE
JONATHAN
LARINA
ROBERT
ARSENIO
HIYASMIN
CRISALDE
LOU ANN
JESSE
JAMES
JOHN PAUL
VENER
SHERYL LYNN
RAYMUND
DELMAREE THERESA
TERELIE
JASPER JACINTO
MARIANNETTE
PANFILO
LEONARD
MA. VIRGINIA
KIRBY KIRK
MA. ROSARIO
MARITES
RICHARD
RENE
VICTOR
KATHRYN
RODULFO
JUDITH
JOSEPH
FREDIE BABB
ROSALIE
RAINER
VINA
MICHELLE AMITA
ELEONOR
STEPHEN
ROY
MARK ANTHONY
REY
ANNA
ALFREDO
RANIE
ANTHONY FRANCIS
SHERYLL
GLADYS
MICHAEL GEORGE
LEANDRO
REGULUS PAUL
MA. REGINA
LEO
MA. ZENAIDA
GENALYN
MICHAEL JOHN
MARICEL
EARL ALAN
CHARLYN MARIE
EDUARDO
LEONILO
CHRISTOPHER
TRILBY
ARLEEN
ROMMEL
JUN
Amount
20,000
37,153
25,000
50,792
17,940
36,917
59,520
83,333
14,974
12,483
75,917
12,833
59,187
34,305
66,667
20,546
52,313
24,612
25,000
44,636
48,750
43,750
21,750
33,000
36,667
42,135
86,875
19,075
31,000
36,250
32,374
87,108
35,311
33,750
50,012
10,725
38,333
37,583
26,250
27,500
110,833
40,000
25,000
10,078
53,333
45,000
73,333
18,612
21,087
122,083
16,556
27,693
12,337
31,380
26,858
45,000
17,500
45,000
292,688
47,917
18,333
10,208
25,288
37,917
376,333
30,390
34,375
64,250
29,167
15,000
20,284
13,685
18,750
28,795
33,333
35,750
134,520
45,000
12,500
131,250
13
Last Name
LINGA
LINGAD
LIPAYSA
LIRAG
LIRAZAN
LIWANAG
LIWANAG
LLAMAS
LLAMAS
LLAMEG
LLANTINO
LLAVE
LLEGO
LLEGO
LONTOC
LOPENA
LOPEZ
LOPEZ
LOPEZ
LOPEZ
LOPEZ
LORENZO
LORICO
LORISTO
LOYA
LOZANO
LOZANO
LUGTU
LUMANAO
MACADAYA
MACALINO
MACALINO
MACARAIG
MACARAIG
MACARANAS
MACARULAY
MACASPAC
MACEDA
MADERA
MAGAHIS
MAGALONA
MAGCALE
MAGPANTAY
MAGSAJO
MAGTIBAY
MAGURA
MAHILUM
MAHINAY
MAJA
MALABANAN
MALAIT
MALATA
MALDIA
MALING
MALIXI
MALLARI
MALLARI
MALLARI
MAMARIL
MAMARIL
MANABAT
MANAGBANAG
MANAJERO
MANALANG
MANALO
MANANGUIT
MANANSALA
MANANSALA
MANCIA
MANCILLA
MANDAPAT
MANGAHAS
MANGALIMAN
MANGAOANG
MANGLE
MANIGOS
MANIQUIS
MANLAPAO
MANN
MANOG
First Name
JAYSON
KAREN PEARL
MELVIN
PAOLO FERNANDO
ORLY
DONALD
RONALDO
JOSE ENRICO
ALTER
MILAGROS
RAYMOND
RUEL
MARIBELLE MONIQUE
ROEL
RONALDO
JENNIFER
RICARDO
JESSIE
ADONIS
LEVI
GRACE
MA. SHEILA
MANUEL
JULIE ANN
ROSANNA
ROBERT
MYRNA
JUNALYN
DIOMEDES
JUNREY
MICHAEL PAUL
JANICE
SEAN
ANNALISA
GIL PONCIANO
FELIX
EMELITA
MANUEL
MYLA
JOCELYN
RUEL
RAYMOND
ALINE
PATRICK JOHN
JERSON
EDDIE LAWRENCE
NIXON
HARLEY
RHINE JOY
RICHELL
ROSEMARIE
REGINA
LORIZ ANN
MAGNOLIA
HENRIETTA
JOCELYN
VICTOR JAMES
CLARK JHUN
WILLIAM
ROGER
ANNA MAE
JEFF
JINNYFER
CHARLNEAL
KAREN
NOEL
MARITES
WILFREDO
JANE
SHARLEEN MAY
FELIXBERTO
MARIA CYNTHIA
ANTHONY
MYRA
BONNIE
GERALDINE
STEFFAN
MARIE CATHERINE
JOEL RAPHAEL
FREELA ARMEA
Amount
15,000
20,833
17,201
25,208
12,500
24,375
62,500
26,667
29,227
13,915
15,000
16,192
31,250
32,500
63,563
22,346
12,541
15,000
31,136
36,715
41,500
29,165
25,000
34,504
44,188
34,648
52,500
13,421
29,167
10,414
14,583
17,744
78,526
126,323
40,000
61,014
10,322
33,425
27,500
37,500
36,105
16,667
11,370
19,875
42,067
11,458
26,250
14,327
41,250
10,000
87,093
28,565
11,667
23,585
12,500
16,106
18,871
81,979
10,000
26,250
67,931
21,875
19,873
18,792
95,833
90,461
48,011
177,879
39,923
16,485
134,071
55,357
25,000
17,500
16,667
10,857
130,925
132,709
38,333
30,000
14
Last Name
MANTUA
MANUEL
MANUEL
MANUEL
MANZANO
MAPANAO
MAPOY
MAQUIRAN
MARANAN
MARASIGAN
MARBIL
MARCELO
MARCELO
MARCELO
MARCIAL
MARCOS
MARGARITO
MARIANO
MARIANO
MARIANO
MARIANO
MARIBOJOC
MARQUEZ
MARQUEZ
MARQUEZ
MARQUEZ
MARTE
MARTIN
MARTIN
MARTINEZ
MARTIR
MASANGKAY
MASILUNGAN
MAYOR
MAYORALGO
MAYORES
MEDINA
MEDINA
MEDINA
MEDINA
MENDEZ
MENDOZA
MENDOZA
MENDOZA
MENDOZA
MENDOZA
MENDOZA
MENDOZA
MENDOZA
MENDROS
MENEZ
MERCADO
MERCADO
MERCADO
MERTO
MICLAT
MIJARES
MIJARES
MILAN
MILANEZ
MILAOR
MILLENA
MINA
MINANO
MINOZA
MIRABEL
MOJICA
MOLINA
MONDOY
MONTALES
MONTANIEL
MONTEJO
MONTERAS
MONTIEL
MORALES
MORALES
MORALES
MORALES
MORALES
MORAS
First Name
CAROLINE
SONNY ANTHONY
LILIBETH
JONATHAN
JESMAN KENNETH
ANTHONY GARTH
MELANIE
MICHAEL
FELISA ANN
NELSON
MARY ROSE
RACQUEL
EDGARDO
MELANIE
BABY MARIBUTCH
MARIELY
RANDY
MAE SHELL
JENICCA
ARVIN
YOLANDA
ANUNSACION
RHODA
ARMILENE
RUBY
PAUL
JULIUS
MARLON
LYNDON PAUL
RICARDO
MA. CARLOTA
REGINALD
JENNIFER
RICABETH SOCORRO
IMELDA
ANNA LIZA
MA. TRISTAN BERNADETTE
ROSARIO
RESORTE
RIZALINDA
JOSEPH
ALMIRA
JAIME
CLAUDIO
HAROLD
ARLYN
GENEVIE
JUANITO
CYNTHIA
MYLENE CLAIRE
MICHELLE
ESPERANZA
MA. JANETTE
MARVIN
MARJORIE
JUDE EDGAR
ANDREW ROY
JENEVIEVE
LLIENETH
CHRISTIAN
JEANNE
LEA
RUBY DYMEL
MICHELLE
JASON
DONAMARK
MARY ANN
ROLLIE
DEINY JOYCE
MADONNA
JOEL
EDWIN
EDGAR
ANDRES
MICHAEL
JOSETTE
DEO ANTONIO
JOUNARY
ARMANDO
ROWENA
Amount
32,667
18,333
40,438
180,000
99,800
45,000
14,268
90,689
63,261
19,215
33,750
16,667
26,625
41,667
38,375
22,917
22,917
18,333
22,500
36,667
120,000
24,607
18,167
34,146
35,396
55,833
57,800
15,417
57,339
29,100
11,108
16,875
33,001
100,000
15,500
82,248
23,539
25,500
56,250
57,662
40,845
12,016
13,776
16,063
18,417
19,684
23,990
89,036
90,228
15,125
12,500
18,659
42,140
46,459
13,750
16,246
10,079
45,820
30,000
30,500
19,167
13,125
28,000
10,000
24,531
16,667
223,449
41,250
30,788
45,985
54,584
19,083
32,500
28,660
20,000
21,244
30,000
38,078
120,579
47,500
15
Last Name
MORENO
MORENO
MORENO
MORRISON
MURGA
NABABLIT
NACINO
NADORA
NAMOC
NAMQUI
NANONG
NAPALLATAN
NAPOLES
NARAGDAO
NARCISO
NARVAEZ
NARVAEZ
NATIVIDAD
NATIVIDAD
NATO
NAVARRO
NAVARRO
NAVARRO
NAVIS
NECESARIO
NERMAL
NERY
NEVARES
NEY
NG
NICASIO
NOBLE
NOBLEZA
NOCHE
NOCHESEDA
NORIEGA
NUESCA
NUNAG
OBISPADO
OBLIPIAS
OBNIAL
OCAMPO
OCAMPO
OCANADA
OCBENA
OCHAVO
OFIAZA
OGOT
OLAES
OLARTE
OLASIMAN
OLEGARIO
OLIVA
OLIVEROS
OLIZON
OMANG
OMANGPANG
OMILA
ONG
ONGPIN
ONGSIP
ONGTANGCO
OPINA
OPULENCIA
ORENDAIN
ORENDAIN
ORLANDA
ORNOPIA
ORTEGA
ORTEGA
ORTEGA
ORUGA
ORYAN
OSERO
OYCO
OYCO
PABILLAN
PABLEO
PABON
PACE
First Name
JANET
ROSA BLANCA
ALFREDO
MYRA
JOSEPH RONALD
MARLON
KAREN ANN
JACQUELINE
EDNA
JULIUS
MARILOU
RAYMUND
MARY JANE
MA. RAQUEL
ROMMEL
GIL
MARLON
VILMA
MANUEL
RYAN EMILSON
ANGELITO
DEAN
SHERWIN
CARLOS
JO PAUL
RHODA MAY
JEVELYN
JUAN EDWIN
ALEXANDER
JONATHAN
JOHN ANDREW
LYNOR
CYRIL
NATHALIE
POLLY
HAZEL
PINKY
RODERICK
RICHARD
MIGUEL
JOAN CHRIS
CARY PAUL JOSEPH
CARLOS
RHIA
RAMIR
EVANGELINE
NENITA
RENITA
ALBERT
JOEL
RANDY
MA. CORAZON
CELIA LOURDES
ARNOLD
VERONICA ELENA
LUCIANO
DIONY
DENNIS
JONCRIS
MIGUEL CARLOS
JACKSON
VALERIE
ROSE MARIE
ROMMEL JOSEPH
JESIELYN
OMAR
MICHAEL
RODOLFO
MELISSA
JOSEPH
DENNIS
RONALD ALLAN
WILMA
RENAN
OSCAR
JOEY ANGELO
SETES
LAILANI
ARIEL
MILA
Amount
16,958
18,333
52,581
20,991
47,917
30,000
17,708
21,375
14,583
18,750
31,620
76,667
19,985
10,500
22,917
21,469
74,000
19,257
23,405
17,692
20,833
22,917
58,138
10,125
34,689
83,321
44,550
13,951
18,750
15,423
31,250
15,000
10,939
32,385
11,625
27,341
135,417
26,667
47,478
16,384
110,987
19,250
28,106
33,271
17,500
45,333
16,333
29,775
33,333
38,056
25,083
27,110
19,479
37,122
13,750
14,163
21,667
78,750
31,583
53,368
16,422
37,500
16,820
14,840
10,061
26,382
31,851
35,786
14,090
25,952
48,875
67,083
14,217
30,698
17,500
31,250
56,590
13,770
11,250
41,667
16
Last Name
PADILLA
PADILLO
PADRINAO
PADUA
PADUA
PAHAGANAS
PALACOL
PALAD
PALANCA
PALERMO
PALISOC
PALTEP
PAMAONG
PAMINTUAN
PANA
PANALIGAN
PANDI
PANGILINAN
PANIGBATAN
PANLAQUI
PANOPIO
PANSOY
PAPA
PARAGAS
PARAGAS
PARAISO
PARANGUE
PARAS
PARAS
PARAS
PARCON
PAREDES
PARRENAS
PASAYLO
PASCASIO
PASCUAL
PASCUAL
PASCUAL
PASOK
PASTORAL
PASTRANA
PATINIO
PAULINO
PAVIDA
PECHO
PEDRIALVA
PEDRO
PEDROSO
PELEGRINA
PELLETERO
PENALOSA
PEPITO
PERAL
PERALTA
PERALTA
PERALTA
PERALTA
PEREZ
PEREZ
PEREZ
PERFECTO
PERIDO
PESCADERO
PETATE
PETILUNA
PIEDAD
PILIEN
PINEDA
PINEDA
PINGOL
PINILI
PIRA
PIZARRAS
PIZARRO-YAM
PLACIDO
PLAYDA
PLEYTO
POCA
POQUIZ
PORCIL
First Name
ROLANDO
RICHARD
PERCIVAL
JANE
DAYTON KIM
MAYLYN
ROSALIN
NANCY
MA. CLARISSA
CATHERINE
ROSEMARIE
EDUARDO
NELSON
DONATO
WILLIAM
CHARMAINE
BERNADETTE
JESUS
DENNIS
MA.ARSENIA
ALDRIN LINCOLN
RUTH
MA. AURORA
MARICAR
FREDIE
EDGARDO
MARIA OLAIRA
MA. MELINDA
CHRISTINE
RADEL
ANNA IRENE
HANNIE
CYRIL
MARK GIL
JOSEPHINE
ESTRELLITA
NORBERTO
LOURDES
DINAH
BARBARA JHOANNA
RENIER
ZORAIDA
JOHN ERIC
CATHERINE
DIVINA AMOR
ROGER ANGELO
KRISTINA
ZABETH
BEVERLY
MARC
JOHN OHMAR
WILDA
WENDELL
MYLA
MARITES
ANTHONY
MARIA CRISTINA
LILYBETH
JAMES
MARIA LOURDES
ANABELLE
ALBERT
RIAN
LIWANAG
ROLLY
MARIA BELINDA LOURDES
ARNEL
RAYMUND CARLO
LAURO
RONALDO
ETHEL
ANA GRACE
RAYMOND
JESUSA
ROBERTO
KHARYLL
LORNA
KATRINA LILIA
RICHARD
CATHERINE
Amount
35,000
18,833
12,000
11,772
33,815
37,500
37,830
19,167
26,333
24,375
27,100
23,750
18,750
18,750
100,625
11,359
13,580
59,125
13,368
61,333
43,750
41,250
14,958
33,417
50,625
38,333
10,324
12,000
14,398
119,875
12,342
15,621
76,875
64,870
11,333
11,156
20,625
44,095
31,250
61,132
29,167
73,191
100,833
17,500
10,058
30,000
19,833
11,000
25,987
70,000
29,792
22,917
10,775
21,175
32,025
75,000
132,994
25,625
33,333
33,333
47,000
25,519
35,000
22,917
44,417
91,667
36,667
24,960
65,125
26,192
14,583
19,735
24,750
13,542
52,500
21,000
29,167
15,377
134,327
11,750
17
Last Name
PORTES
POSADAS
POTATO
POTENCIANO
PRADO
PRIVADO
PUNAN
PUNCIA
PUNZALAN
PUNZALAN
PUNZALAN
PURI
PURIFICACION
PUSING
QUERUBIN
QUIAMBAO
QUILILAN
QUILLON
QUINTOS
QUION
RACCA
RACILES
RADA
RAFAELES
RAFANAN
RAFLORES
RAGANDANG
RAMIREZ
RAMOLETE
RAMOS
RAMOS
RAMOS
RAMOS
RAMOS
RAQUEDAN
RAZO
RAZON
REAL
REAL
REALIGUE
REBANCOS
REBLANDO
RECIO
REGASPI
REGOSO
REODIQUE
REQUINTO
REYES
REYES
REYES
REYES
REYES
REYES
REYES
REYES
REYES
REYES
REYES
REYES
REYES
REYES
REYES
RICARTE
RICOHERMOSO
RIVERA
RIVERA
RIVERA
RIVERA
RIVERA
RIVERA
ROA
ROBEA
ROBLES
ROBRIGADO
RODELAS
RODIL
RODRIGUEZ
RODRIGUEZ
RODRIGUEZ
RODRIGUEZ
First Name
MARY JOY
GERALD REY
GERALD
RONALDO
ROVI
EMELYN
DULCE
SHEILA
CRISTIAN
CONCEPCION
ALLAN
MICHAEL
BERT
SHEILAH MICHELLE
JULIE ANNE
MARIANNE
ALVIN GERARD
ISRAEL
NORBEN
RONALD
LAILA
AISSA NINIA
ALDRIN NEIL
JOSELITO
DENNIS
IRNAND
MYRA
MEDEL
AUDI JOHN
ERNESTO
IRWIN JAMES
REYNOLD
MARJORIE
ARMAND
LUISA
BRIANNE
AILEEN
ARNEL
RODEL
KATHERINE ANN
JOSEPH
ROMMEL
SHERWIN
JHEYSEBELL
RUBY ALLYN
DOMINGO
PORFERIO
LIEZL
ROBIE
ERWIE
RUFINO
MARIA RIZZA
ROVIL
DEL AMOR
MARIA GLORIA
PATRICK JEROME
ROGEL
VIVIAN
FRANCIS ARVIN
SUSAN
JULES VERNE
JOSE LUIS
WALTER
LERMA
ALBERT
ROMANO
ESPERANZA
RENEIR
RONALD
SHERYL
CHRISTIE
ROSALYN MAY
MA CRISTINA
CIELO
NOEL
GERMAR JOSEPH
FERNANDO
CHRISTIAN
DIANA JILL
KAREN
Amount
50,125
162,750
20,000
21,965
23,750
29,167
28,643
27,500
13,843
78,630
93,000
23,050
31,404
11,458
27,708
46,042
166,667
13,750
23,250
12,500
25,229
10,417
77,558
14,846
30,000
25,000
103,750
38,894
22,437
10,076
23,333
35,000
53,358
100,500
21,750
13,749
86,956
12,500
22,500
11,124
27,083
10,832
12,469
32,750
12,500
25,000
37,424
10,000
10,452
10,740
10,908
12,500
13,963
15,000
19,396
21,811
24,000
25,000
27,500
41,667
55,000
162,500
66,667
45,328
10,083
18,000
30,417
35,083
35,208
41,667
25,117
10,000
13,212
29,313
46,667
99,813
12,500
13,750
15,633
41,773
18
Last Name
RODRIGUEZ
RODRIGUEZ
ROLDAN
ROMABILES
ROMANO
ROMERO
ROMERO
ROMERO
ROMERO
ROMERO
ROMO
ROQUE
ROQUE
ROSAL, JR.
ROSALES
ROSALES
ROSALES
ROSARIO
ROSAUPAN
ROSELL
ROSELLO
ROXAS
RUBIO
RUELAN
RUFINO
RUIZ
RUIZ
RUZ
SABADO
SABANG
SABAY
SABLAYAN
SADORRA
SAET
SAGMIT
SAGUN
SALANGA
SALAVERRIA
SALAVERRIA
SALES
SALGADO
SALUD
SALVADOR
SALVADOR
SALVADOR
SALVIEJO
SALVINO
SALVO
SAMONTANEZ
SAMSON
SAMUDIO
SAN DIEGO
SAN GABRIEL
SAN MIGUEL
SANCHEZ
SANCHEZ
SANCHEZ
SANCHEZ
SANCHEZ
SANGALANG
SANGALANG
SANTIAGO
SANTIAGO
SANTIAGO
SANTIAGO
SANTOS
SANTOS
SANTOS
SANTOS
SANTOS
SANTOS
SANTOS
SANTOS
SANTOS
SANTOS
SANTOS
SANTOS
SANTOS
SAPIN
SARAIDA
First Name
TITUS JOSEPH
ARNEL
MARY GIRLIE
LANA RENEE
NADJA AVA
MARIZEN
ALLAN
EDMUND DANTES
GLEN
JESUS
MARIA PAZ
ERWIN
GLEN
GODOFREDO
LYN
LEOVIGILDA
NELSON
SHIELA MAE
GILBERT
EASTER
DANTE
HILARIO
ROGELIO
RONALD
LOIDA
MARIA AILEEN
REYNALEE ANN
ARTEMIO
MARY LORELIE
DONNIE-LEE
MYLENE
HELENE CECILIA
MARIA ANNA PATRICIA
ALICE
RICARDO
ARDIE
CHRISTIAN ARVIN
ARNOLD
ELI
CATHERINE
RUEL
DEMETRIO
DENNIS GABINO
REYNANTE
VICTORIO
CAROLINA
RIZZA
REY AMOR
MELODY ANN
CHRISTOPHER
MARIA TERESA
ELISA
ALAN
LEILANI
INGRAD
NORINA AILEEN
ARNOLD
JOHN CARLO
VIOLY
RUBY
MYLA
DOMINIC
JANICE ABIGAEL
CHRISTOPHER
WILMA
MYLEEN
MARITES
JOHANNA LYNN
MA. JOYCELY ANN
EFREN
MARK ALVIN
MARYJOYCE
JENNIFER
ROSEMARIE
ELEIN
REYMUNDO
MELVIN
JENNIFER JOY
ROMEO PAULO
CATHERINE
Amount
43,820
85,355
11,977
32,263
16,750
13,275
21,875
45,833
57,500
82,815
16,667
73,333
104,667
14,257
10,500
11,763
26,250
50,000
39,341
21,000
34,375
41,667
27,413
20,556
21,217
12,003
39,463
24,937
10,000
84,167
12,768
23,753
73,043
25,748
18,750
14,000
15,000
16,799
62,500
14,226
25,668
25,875
25,839
27,500
83,333
12,500
20,208
31,891
21,271
191,667
35,171
22,917
33,333
61,515
10,000
12,396
20,833
22,408
22,500
11,891
168,682
24,292
27,465
41,767
65,514
10,354
11,250
11,654
11,917
12,871
13,750
20,749
24,493
34,125
37,500
39,951
86,667
125,000
30,753
15,062
19
Last Name
SARCAUGA
SARTE
SAY
SEBASTIAN
SEBIAL
SEE
SENGCO
SERAFICA
SERRANILLO
SERRANO
SESBRENO
SEVERINO
SEVILLA
SEVILLA
SIEJA
SIGWA
SILDA
SILVA
SILVA
SIMBULAN
SIMON
SINCO
SINDIONG
SINGSON
SINGSON
SINGSON
SIONGCO
SISON
SISON
SOLATRE
SOLIS
SOLIS
SONZA
SORIANO
SORIANO
SOSING
SOTECO
STA. CATALINA
SUAREZ
SUGAROL
SULIT
SULTAN
SUMANG
SUMAYAO
SUMILANG
SUNER
SUSULIN
SUYCANO
SY
TABANAO
TABIGUE
TABLANTE
TABORADA
TABUAC
TABUG
TAGOS
TAGUDIN
TAGUIBAO
TAMAYO
TAMONDONG
TAMSE
TAN
TAN
TAN
TAN
TAN
TAN
TAN
TAN
TAN
TAN
TAN
TANHUECO
TANYANG
TAPIA
TARGA
TARLENGCO
TECSON
TECSON
TEJANO
First Name
ALEXANDER
CLEMENTE ANTONIO
VANESSA ELAINE
JOHN RAYMOND
LYN
ROBIN
SONNY
CONSTANTINE
ERICSON
WILBERT
JOHN
GIL THEODORE
NOEMI
JANICE COLEEN
MARICHU
EMILY
JUHN EVANS
NICO
NOELYN
FREDERICK
MICHAEL
MICHELE
VALIANT
RONALD
RONNIE
MARIA VIRGINIA
NATHANIEL PASCHAL
MARIA LYNDA
SANTIAGO
DULCE AMOR
MICHAEL
MA. TERESA
MARY ANTONETTE
MERCELIZA
NIA
CECILE
ROSITA
RONALD
MA. CELESTE
JELACIO
WALTER
MARIVIC
JASON
MARLEX
SHERYL
LINO EDGAR
GILBERT FRANCIS
ROGER
BUENAVENTURA
LOEN
RICHARD
ARIEL
GEROME
CRISTINA
CLARINDA LISETTE
ALVIN
KATHERINE
FERDINAND
SERGIO
REXON
JOHN ANTHONY
TIMOTHIE
ERWIN
ANNA LIZA
MARC KELVIN
AYAN
PETER
DAX LAWRENCE
MARY JOY
SHARON
BRYAN VINCENT
MARIA CATHERINE
MILDRED
OSCAR
JOY
VINCENT JOHN PAUL
JERNEL
MAHALIA
CHARISSE
MARY ANN
Amount
22,500
75,613
43,917
13,277
152,354
38,500
28,333
128,125
64,347
21,567
11,125
16,107
31,188
35,000
40,998
10,435
16,256
48,412
120,867
10,000
27,409
25,170
52,000
45,052
48,333
69,032
60,625
17,708
22,500
10,000
12,161
22,917
103,466
24,750
82,917
32,167
32,167
54,167
38,891
18,750
36,311
24,923
28,102
27,708
13,808
31,890
55,417
25,000
21,185
41,333
50,000
18,717
36,357
36,632
15,625
23,375
87,779
21,822
31,520
11,000
151,250
14,000
18,118
20,625
22,167
27,002
35,933
50,000
71,667
77,651
78,750
175,000
50,979
55,000
12,822
21,399
24,726
18,958
45,000
11,667
20
Last Name
TEJONES
TENDILLA
TENG
TENTATIVA
TESTA
TIAMBENG
TIANCO
TICSAY
TIGLEY
TIMBANG
TINIO
TINIO
TIO
TIOSEJO
TIU
TIVIDAD
TIZO
TOLEDO
TOLEDO
TOLENTINO
TOLENTINO
TOLENTINO
TOLENTINO
TOLENTINO
TOLENTINO
TOLENTINO
TOMACRUZ
TOMAKIN
TORILLO
TORIO
TORRECAMPO
TORRES
TORRES
TORRES
TORRES
TORRES
TRINIDAD
TRUJILLO
TSANG
TUAZON
TUDTUD
TUGAOEN
TULAY
TUMANG
TY
UCHI
URIBE
UY
UY
UYAO
UYCHUTIN
VALDEPENAS
VALDERRAMA
VALDES
VALDEZ
VALDEZ
VALENCIA
VALENCIA
VALENTON
VALENZUELA
VALLEJO
VALLESTERO
VARGAS
VARGAS
VARIAS
VASQUEZ
VAZQUEZ
VEGA
VELINA
VELOSO
VENDIOLA
VENERACION
VENTURA
VENTURANZA
VERCELES
VERDAD
VERGARA
VERGARA
VERSOZA
VICENTE
First Name
JEFFERSON
JANICE
MA. TERESA
MADELON
JENNYLYN
SHYDEE
RODOLFO
PAULINO
JEROME LESTER
CLARISA
CONRAD
ALBERT RAYMUND
FELICRISER
MARICEL
WILBERT
AIDA
MARIE CRIS
NERISSA
RENATO
MA. CRESENCIA
BENJAMIN
JULIUS CESAR
RACHELLE ANN
MARIA ACELA
JOSE RODELIO
DIANA
EMILY
ANSELMA
NORMAN
EDIROSE
JOSELITO
DIANE JOY
LOUIE
VICENTE
ARNOLD
MA. ELENITA
SHERIELLE KERL
DYNA
BRYAN KENNETH
ELEANOR
ANTONIO
SHUYEN PAMELA
JOSE VIRGILIO
ENRIQUE
CHRISTOPHER
RODERICK
ALVIN
ALEXANDER ALEN
CATHERINE
ALBERT
RONALD
FLOYD KARSTEN
ALFONSO
MARIA VERONICA
ROWENA
ALDY
MISLEY
SALLY
JENNY LYN
MICHELLE
OLIVER
JASPER
EVANGELINE
MA. KRISTINA
HENRY JEFFREY
ARISTOTLE
JOSE LUIS
CARMELITA
WILLIE
MA. BETTINA
ANNA MA. RITA
JUAN MARIA
VIVIAN
KIM BRYAN
GARY FRANCIS
ARNOLD
ROBERTO
ESTRELLITA
DEBBIE
MICHAEL
Amount
20,163
14,304
70,000
21,000
10,165
65,783
96,000
168,750
24,610
25,000
34,860
83,931
14,693
20,000
244,910
18,360
10,833
14,440
47,951
10,000
15,467
18,774
30,000
33,927
44,791
57,989
391,667
54,167
14,583
12,755
16,957
12,500
25,000
37,500
45,395
75,625
15,000
73,750
110,116
20,833
20,833
30,833
32,500
16,172
62,500
13,333
27,083
18,006
145,113
35,625
112,500
27,300
27,684
35,000
22,917
110,178
14,208
24,750
28,542
10,935
46,500
35,912
15,974
17,401
75,417
57,888
18,750
10,208
35,250
50,833
21,352
79,167
61,250
47,500
16,559
13,180
18,750
54,167
25,000
16,875
21
Last Name
First Name
VICERA
DAISY
VIDAL
GERARD REHNNE
VIDANIA
ERICK ADONIS
VIERNES
MARIO GERMANO
VILLA
LILIAN
VILLAFLORES DINNA PERLIE
VILLAFRANCA PRISCILA BELINDA
VILLAFUERTE MICHELLE
VILLAGONZALO CESAR
VILLAHERMOSA AILEEN
VILLAJOS
RAQUEL
VILLALON
RODOLFO
VILLANUEVA
PATRICIA
VILLANUEVA
JOANNA MARIE
VILLANUEVA
CRISTINA
VILLANUEVA
MARIA SUZETTE
VILLANUEVA
JOLAN
VILLANUEVA
AURORA
VILLANUEVA
JENNIFER
VILLANUEVA
ROMEL
VILLARICO
MARIA ROSARIO
VILLAROJO
HENRY
VILLASENOR
RACHELLE JOANNA
VILLENA
MA LILIBETH
VINALON
ROCHELLE
VINAS
ULYSSES
VINLUAN
HENRY
VIRAY
IRENE
VIRGENIA
JASMIN
VIRREY
MICHELLE JOY
VIRTUCIO
GILBERT
VISDA
NERIZA
VITUG
VICTOR IVAN PABLO
YASON
PAOLO ANTONIO
YOUNG
MICHELLE
YU
NICOLAS
YUHICO
MYRA
YUIPCO
KARLA
YUMUL
SANDIE
YUNTING
RONNIE
ZAFRA
ZEL
ZAMORA
MARIA THERESA
ZAMORA
MARISSA
ZAPATA
LINAMOR HAZEL
ZARZA
JAY
ZUNO
ANA MARIE
others (below 10k)
Total
Amount
18,000
49,763
16,875
21,542
35,178
46,455
22,917
23,458
38,333
32,354
110,000
10,125
11,630
14,304
15,000
15,000
19,432
25,871
51,700
64,431
50,417
26,667
16,667
37,500
29,776
21,750
24,586
18,000
14,034
36,515
130,512
40,625
75,242
33,345
25,340
36,522
25,328
45,833
27,083
15,308
17,500
17,458
18,563
15,000
43,649
11,148
3,993,228
66,137,815
22
G-XCHANGE, INC
Schedule B.1 - Hospitalization, Medicines and Others
As of December 31, 2010
Last Name
FRANCISCO
SABANDAL
SOLIS
Total
First Name
KAREN
MARIA SHEELA
CLAIRE
Amount
9,851
80,068
110,050
199,969
23
INNOVE COMMUNICATIONS, INC
Schedule B.1 - Hospitalization, Medicines and Others
As of December 31, 2010
Last Name
First Name
Amount
NO OUTSTANDING BALANCE AS OF DECEMBER 31, 2010
24
ENTERTAINMENT GATEWAY GROUP CORPORATION (EGGC)
Schedule B.1 - Hospitalization, Medicines and Others
As of December 31, 2010
LAST NAME
FIRST NAME
VALERIO
TUAZON
TORRES
TAMAYO
SANTOS
SALVACION
RAMIREZ
PAROLMA
NARTATES
MORATA
MORADA
MERCADO
MALAZARTE
MAHUSAY
JOVEN
GARROTE
GARCIA
GARCES
FRANCISCO
FOJAS
EDRADA
DEMAYO
DAVID
CORLA
CONOCIDO
CELINO
CAGANDAHAN
AUSTRIA
ALBAR
Total
EDMEL
RENEE ROSE
ANN GENEVI
ROXANNE
KRISTINE
RONALDO
JEERAVEL
CHRISTELLE
KRISTINE ANN
CEASAR
MARIEJO
IVY
FE
CARLA
JONAH MARIE
FATIMA
ABIGAIL
GIAN CARLO
PAULO
IVAN
MARK WILSON
JENNY
MARIA JOHANNA
MARK ANTHONY
RONNIE
ROMULO
MARGARET
ERNA
MA. SANDRA
AMOUNT
460
990
2,882
4,136
-415
500
2,051
2,073
35
-538
8,333
63
-535
4,147
15
1,593
4,241
2,073
4,976
6,220
1,593
4,147
4,095
833
3,187
8,000
3,358
2,073
34,753
105,338
25
GLOBE TELECOM, INC. AND SUBSIDIARIES
SCHEDULE E - Intangible Assets
As of December 31, 2010
(In Thousand Pesos)
Classification
Cost
Accumulated amortizatio
Total
Balance as of
Reclassifications /
December 31, Additions at cost Retirements/Disposal
Adjustments
2009
7,459,540
169,329
(128,606)
884,907
(4,803,809)
(746,495)
120,561
2,655,731
(577,166)
(8,045)
(34,176)
850,731
Balance as of
December 31,
2010
8,385,170
(5,463,919)
2,921,251
26
GLOBE TELECOM, INC. AND SUBSIDIARIES
SCHEDULE F - Long Term Debt
As of December 31, 2010
(in thousand pesos)
Nature of Funded
Obligation
Amount shown under
Amount shown
caption "Current
Amount authorized by
under caption "Longportion of long-term
Rate During the Year
indenture
Term Debt" in related
debt" in related
balance sheet
balance sheet
Date of
Maturity
Corporate Notes
Standard Chartered Bank
FMIC
Banks
Local
Banco de Oro
Land Bank of the Philippines
Metrobank
Unionbank
Allied Bank
Development Bank of the Philippines
Foreign
SCB - $100Mn Nordeutsche Landesbank Glrozen
DBS Bank Ltd
Nordlandesbank $66M loan
EDC $50M
CITICORP ($50Mn)
Nederlandse Financierings ($25Mn)
Retail Bond
PDTC P5.0B Bonds - P1.974B 3yr Fixed
PDTC P5.0B Bonds - P3.026B 5yr Fixed
TOTAL
Php12,800,000
4,078,703
8,709,695
2.67% - 7.03%
Php5,000,000
28,735
4,912,807
3.28% - 8.38%
& 4/12/2013;
3/15/2012
5/23/2014 and
5/23/2016
Php4,000,000
Php1,000,000
Php6,500,000
Php3,000,000
Php2,000,000
Php5,000,000
0
249,071
24,970
426,931
19,920
49,767
3,995,129
684,946
5,440,819
2,561,586
1,972,116
4,926,938
4.84% -5.44%
5.07% - 5.41%
2.65% - 6.28%
3.37% - 5.85%
7.03%
2.26% - 5.20%
8/9/2013
7/30/2014
8/8/2013; 11/23/2015
12/4/2014
2/11/2015
9/8/2015
$100,000
$50,000
$66,000
$50,000
486,789
654,628
1,140,380
1,084,342
0
218,209
0
542,171
1.24% - 1.55%
.74% - .99%
2.29% - 2.54%
3.41% - 3.50%
$50,000
$25,000
307,457
125,516
1,807,963
950,028
2.94% - 4.13%
3.69% - 4.13%
1/27/2011
4/15/2012
12/24/2011
4/28/2012
7/15/2014 and
7/15/2016
7/15/2016
Php1,974,450
Php3,025,550
0
0
1,966,362
3,005,492
7.50%
8.00%
2/25/2012
2/26/2014
8,677,209
41,694,261
27
GLOBE TELECOM, INC. AND SUBSIDIARIES
SCHEDULE I - Capital Stock
As of December 31, 2010
Class of Stock
Number of
Shares
Authorized
No. of shares
allocated to
stock option
Total Issued and
Outstanding
Number of Shares Held by
Majority Stockholders
Directors,
Officers and
Employees
Minority
Stockholders
Number of
Shares
Reserved for
Warrants
Common
179,934,373
10,796,062
132,348,473
123,481,535
144,617
8,722,321
0
Preferred (Series "A")
250,000,000
0
158,515,021
158,515,018
3
0
0
28
GLOBE TELECOM, INC AND SUBSIDIARIES
Globe Telecom Plaza, Pioneer Cor Madison Sts, Mandaluyong City
< nature of dividend declared >
Adjusted Unappropriated Retained Earnings, beginning
Add: Net income actually earned/realized during the period
Net income during the period closed to Retained Earnings
Less: Non-actual/unrealized income net of tax
Equity in net share of associate/ joint venture/subsidiaries
Unrealized foreign exchange gain - net
Unrealized actuarial gain
Fair value adjustment (mark-to-market)
Fair value adjustment of Investment Property resulting to gain
Adjustment due to deviation from PFRS/GAAP - gain
9,604,560,849.81
9,744,633,866.18
(392,271,343.19)
5,433,331.62
0.00
(386,838,011.57)
Add: Non-actual losses net of tax
Depreciation on revaluation increment
Adjustment due to deviation from PFRS/GAAP - loss
Loss on fair value adjustment of investment property
0.00
Net income actually earned/realized during the period
Add (Less):
Dividend during the period
Consolidation adjustment on RE
Dividends declared by subsidiary in 2008
Treasury shares
Total Retained Earnings, end - Available for Dividend
9,357,795,854.60
(10,638,356,987.78)
186,855,039.24
0.00
0.00
(10,451,501,948.54)
8,510,854,755.87
29
30