Issue Manager Joint Lead Underwriters The date of

Transcription

GLOBE TELECOM, INC.
THE GLOBE TOWER,
32ND STREET CORNER 7TH AVENUE
BONIFACIO GLOBAL CITY, TAGUIG CITY
Telephone Number (632) 797-2000
Prospectus relating to the Primary Offer in the Philippines of 14,000,000
Series A Non-Voting Perpetual Preferred Shares
with an Oversubscription Option for up to an additional 6,000,000 Series A
Non-Voting Perpetual Preferred Shares
at an Offer Price of P500.00 per Share
to be listed and traded on the
Main Board of The Philippine Stock Exchange, Inc.
Issue Manager
Joint Lead Underwriters
The date of this Prospectus is 8 August 2014
ALL REGISTRATION REQUIREMENTS HAVE BEEN MET
INFORMATION CONTAINED THEREIN IS TRUE AND CORRECT
AND
ALL
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GLOBE TELECOM, INC.
THE GLOBE TOWER,
32ND STREET CORNER 7TH AVENUE
BONIFACIO GLOBAL CITY, TAGUIG CITY
Telephone Number (632) 797-2000
www.globe.com.ph
This Prospectus relates to the offer and sale (the ―Offer‖) of 14,000,000, cumulative, non-voting
Series A Perpetual Preferred Shares (the ―Preferred Shares‖ or ―Shares‖) of Globe Telecom, Inc.
(―Globe‖ or the ―Issuer‖ or the ―Company‖) , a corporation organized under Philippine law. In the event of
an oversubscription, the Joint Lead Underwriters, with the consent of the Company, reserves the right to
increase the size of the Offer up to an additional 6,000,000 Series A Perpetual Preferr ed Shares (the
―Oversubscription Option‖), for an aggregate issue size of up to 20,000,000 Series A Perpetual
Preferred Shares. The Preferred Shares will be issued on August 22, 2014 (the ―Issue Date‖) by the
Company from its 40,000,000 unissued N o n - V o t i n g Preferred Share capital. Each Preferred
Share has a par value of P50.00 and a liquidation right equivalent to P500.00 (the ―Liquidation Right‖).
The Preferred Shares are being offered for subscription solely in the Philippines through the Joint
Lead Underwriters (the ―Underwriters‖) and Selling Agents named herein at a subscription price of
P500.00 per share (the ―Offer Price‖ or the ―Issue Price‖). The trading symbol of the Company for the
Preferred Shares shall be ―GLOPP‖.
Following the Offer, and assuming the Oversubscription Option is exercised in full, the Company will have
(a) 132,680,427 of 148,934,373 authorized common shares, (b) 158,515,021 of 160,000,000 authorized
Voting preferred shares (―Voting Preferred Shares‖), and (c) 20,000,000 of 40,000,000 Non-Voting
Preferred Shares. The holders of the Preferred Shares do not have identical rights and privileges with
holders of the existing common shares of the Company. (See ―Description of the Securities‖ on page 34)
The declaration and payment of Dividends on the Shares on each Dividend Payment Date will be subject
to the sole and absolute discretion of the Issuer‘s Board of Directors (the ―Board‖) to the extent permitted
by law. The declaration and payment of dividends (except stock dividends) do not require any further
approval from the shareholders.
As and if declared by the Board, dividends on the Shares shall be at a fixed rate of 5.2006% per annum
calculated in respect of each Share by reference to the Offer Price thereof in respect of each Dividend
Period (as defined herein)(also the ―Dividend Rate‖). Subject to the limitations described in this
Prospectus, dividends on the Shares will be payable on a semi-annual basis in arrears on February 22,
and August 22 of each year (each a ―Dividend Payment Date‖ as defined herein). Unless the
Preferred Shares are redeemed by the Company on the Rate Re-Setting Date, the Dividend Rate for
all following Dividend Periods shall be the higher of (a) the prevailing Dividend Rate on the Rate ReSetting Date or (b) the sum of (i) the Reference Rate applicable for the Rate Re-Setting Date, and (ii)
the Step-Up Spread. (See ―Summary of the Offering‖ on page 26).
Dividends on the Shares will be cumulative. If for any reason the Issuer‘s Board does not declare a
dividend on the Shares for a dividend period, the Issuer will not pay a dividend on the Dividend
Payment Date for that dividend period. However, on any future Dividend Payment Date on which
dividends are declared, holders of the Shares as of record date of such dividends must receive the
Dividends due them on such Dividend Payment Date as well as all Dividends accrued and unpaid to
the holders of the Shares as of the same record date prior to such Dividend Payment Date (see
―Description of the Securities‖ on page 34).
As and if declared by the Board, the Issuer may redeem the Preferred Shares on the Rate Re-Setting Date
or any Dividend Payment Date after the Rate Re-Setting Date (as defined in this Prospectus) in whole (but
not in part only), at a redemption price equal to the Issue Price plus any accrued and unpaid dividends after
deduction for any tax and customary transfer costs to effect the redemption (the ―Redemption Payment‖).
Administrative costs and out of pocket expenses, which includes the cost of checks used, supplies, paying
agency services, messengerial services and mailing fees in relation to the Redemption Payment shall be for
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the account of Globe. The Redemption Payment shall be made to holders of the Shares as of the record
date set by Globe for such redemption.
Subject to compliance with law, Globe may purchase the Shares at any time at any price either through the
PSE, by public tender or through negotiated transactions. Any Shares redeemed or purchased by Globe
shall be recorded as treasury stock of Globe and may be re-issued in the future at such terms and at such
time as Globe may determine.
All payments in respect of the Preferred Shares are to be made free and clear of any deductions or
withholding for or on account of any present or future taxes or duties imposed by or on behalf of the
Government of the Republic of the Philippines (the ―Government‖), including but not limited to, stamp,
issue, registration, documentary, value added or any similar tax or other taxes and duties, including
interest and penalties. If such taxes or duties are imposed, the Issuer will pay additional amounts so
that holders of Preferred Shares will receive the full amount of the relevant payment which otherwise
would have been due and payable, provided, however, that the Issuer shall not be liable for (a) the
final withholding tax applicable on dividends earned on the Preferred Shares prescribed under the
National Internal Revenue Code of 1997, (b) expanded value added tax which may be payable by any
holder of the Preferred Shares on any amount to be received from the Issuer under the Offer and (c)
any withholding tax of any amount payable to any holder of Shares or any entity which is a nonresident foreign corporation. If payments become subject to additional withholding or any new tax as a
result of certain changes in law, rule or regulation, or in the interpretation thereof, and such tax cannot
be avoided by use of reasonable measures available to the Issuer, the Issuer may redeem the
Shares in whole, but not in part, on any Dividend Payment Date (having given not more than 30 nor
less than 60 days‘ notice) at the Issue Price plus all accrued and unpaid dividends, if any (see
“Summary of the Offering” on page 26; the taxes applicable on the Preferred Shares are discussed in
the section on ―Taxation‖ on page 196).
The Shares will constitute direct and unsecured subordinated obligations of the Issuer ranking at least
pari passu in all respects and rateably without preference or priority among themselves with all other
Preferred Shares issued by the Issuer.
The Shares will be issued in scripless form. Title to the Shares shall pass by endorsement and
delivery to the transferee and registration in the registry of shareholders to be maintained by the
Registrar and Depository Agent (as defined herein). Settlement of the Shares in respect of such
transfer or change of title to the Shares, including the settlement of documentary stamp taxes, if any,
arising from subsequent transfers, shall be similar to the transfer of title and settlement procedures for
listed securities in the PSE (see “Summary of the Offering” on page 26).
Through the Offer and based on the Offer Price set forth above, the Company expects to raise gross
proceeds of approximately P7,000,000,000.00 or P10,000,000,000.00, if the Oversubscription Option is
exercised in full. The net proceeds from the Offer, estimated to be at P6,923,056,788.98, or
P9,893,766,466.40 if the Oversubscription Option is exercised in full are determined by deducting from
the gross proceeds the SEC Registration fees, underwriting and selling fees, documentary stamp taxes
and other related fees and out-of-pocket expenses, will be used by the Company to partially finance
its capital expenditure requirements for 2014. (See “Use of Proceeds” on page 52). BPI Capital
Corporation (―BPI Capital‖) acting as Issue Manager (the ―Issue Manager‖), shall receive underwriting
fees of 0.35% of the gross proceeds of the Offer, inclusive of amounts to be paid to the Joint Lead
Underwriters, Co-Lead Underwriters and Selling Agents.
Some of the Company‘s existing loan agreements contain covenants that restrict the declaration or
payments of dividends under certain circumstances, such as the occurrence of an event of default
under such loan agreements or if such payment would cause an event of default to occur (see
“Description of the Securities” on page 34).
No dealer, salesman, or any other person has been authorized to give any information or to make any
representation not contained in this Prospectus. If given or made, any such information or
representation must not be relied upon as having been authorized by the Company, the Issue
Manager or any of the Underwriters. The distribution of this Prospectus and the offer and sale of the
Preferred Shares may, in certain jurisdictions, be restricted by law. The Company and the Issue
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Manager require persons into whose possession this Prospectus comes, to inform themselves of and
observe all such restrictions. This Prospectus does not constitute an offer of any securities, or any
offer to sell, or a solicitation of any offer to buy any securities of the Company in any jurisdiction, to or
from any person to whom it is unlawful to make such offer in such jurisdiction.
Unless otherwise stated, the information contained in this Prospectus has been supplied by the
Company. To the best of its knowledge and belief, the Company (which has taken all reasonable care
to ensure that such is the case) confirms that the information contained in this Prospectus is correct,
and that there is no material statement or omission of fact which would make any statement in this
Prospectus misleading in any material respect. The Company hereby accepts full and sole
responsibility for the accuracy of the information contained in this Prospectus. The Company and the
Underwriters have exercised due diligence in ascertaining that all material representations contained in
the Prospectus, its amendments and supplements, are true and correct, and that no material
information was omitted which was necessary in order to make the statements contained in the
aforementioned documents not misleading. The Issue Manager and the Underwriters confirm that they
have exerted reasonable efforts to verify the information contained herein but do not make any
representation, express or implied, as to the accuracy or completeness of the materials contained
herein. The Issue Manager and the Underwriters, having made all reasonable enquiries, confirm that
this document contains all information with respect to the Issuer, the Underwriters, and the Series A
Preferred Shares which is material in the context of the issue and offering of the Series A Preferred
Shares, that the information contained herein is true and accurate in all material respects and is not
misleading, that the opinions and intentions expressed herein are honestly held and have been reached
after considering all relevant circumstances and are based on reasonable assumptions, that there are
no other facts, the omission of which would, in the context of the issue and offering of the Preferred
Shares, make this document as a whole or any of such information of such information or the
expression of any such opinions or intentions misleading in any material respect and that all reasonable
enquiries have been made by the Issuer to verify the accuracy of such information. The Issuer accept s
responsibility accordingly.
Unless otherwise indicated, all information in this Prospectus is as of March 31, 2014. Neither the
delivery of this Prospectus nor any sale made pursuant to this Prospectus shall, under any
circumstances, create any implication that the information contained herein is correct as of any date
subsequent to the date hereof or that there has been no change in the affairs of the Company and its
subsidiaries since such date. Market data and certain industry forecasts used throughout this
Prospectus were obtained from internal surveys, market research, publicly available information and
industry publications. Industry publications generally state that the information contained therein has
been obtained from sources believed to be reliable, but that the accuracy and completeness of such
information is not guaranteed. Similarly, internal surveys, industry forecasts and market research,
while believed to be reliable, have not been independently verified, and none of the Company, the
Issue Manager and the Underwriters make any representation as to the accuracy of such information.
Each person contemplating an investment in the Preferred Shares should make his own investigation
and analysis of the creditworthiness of Globe and his own determination of the suitability of any such
investment. The risk disclosure herein does not purport to disclose all the risks and other significant
aspects of investing in the Shares. A person contemplating an investment in the Preferred Shares
should seek professional advice if he or she is uncertain of, or has not understood any aspect of the
securities to invest in or the nature of risks involved in trading of securities, especially those high-risk
securities. Investing in the Preferred Shares involves a higher degree of risk compared to debt
instruments. For a discussion of certain factors to be considered in respect of an investment in the
Preferred Shares, see the section entitled ―Risk Factors‖ beginning on page 43.
The PSE assumes no responsibility for the correctness of any statements made or opinions
expressed in this Prospectus. The PSE makes no representation as to its completeness and expressly
disclaims any liability whatsoever for any loss arising from reliance on the entire or any part of this
Prospectus. The issuance of the Preferred Shares has been approved by the Board of Directors of
the PSE. Such approval for issuance is permissive only and does not constitute a recommendation or
endorsement of the Preferred Shares by the PSE.
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TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS .............................................................................................................................. 7
DEFINITION OF TERMS ................................................................................................................................................ 8
EXECUTIVE SUMMARY............................................................................................................................................... 11
SUMMARY OF THE OFFER .......................................................................................................................................... 26
DESCRIPTION OF THE SECURITIES .............................................................................................................................. 34
RISK FACTORS........................................................................................................................................................... 43
USE OF PROCEEDS .................................................................................................................................................... 52
PLAN OF DISTRIBUTION ........................................................................................................................................... 54
CAPITALIZATION ...................................................................................................................................................... 60
DILUTION .................................................................................................................................................................. 61
DETERMINATION OF OFFER PRICE .......................................................................................................................... 62
THE COMPANY .......................................................................................................................................................... 63
LEGAL PROCEEDINGS ................................................................................................................................................. 99
OWNERSHIP ............................................................................................................................................................ 103
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION ............. 106
MANAGEMENT ........................................................................................................................................................ 180
MATTERS AFFECTING LIQUIDITY AND CAPITAL EXPENDITURE ................................................................................. 193
INDEPENDENT AUDITORS AND COUNSEL ................................................................................................................ 194
TAXATION ............................................................................................................................................................... 196
THE PHILIPPINE STOCK MARKET .............................................................................................................................. 201
APPENDIX ................................................................................................................................................................ 208
Map of the Relationships of the Companies within the Globe Group as of December 31, 2013
Statement of Management‟s Responsibility
Independent Auditors‟ Report
Consolidated Financial Statements – December 31, 2013 and 2012 and Years Ended December 31,
2013, 2012 and 2011
Schedule 1 – Schedule of all effective standards and interpretations as of December 31, 2013
Schedule 2 – Reconciliation of retained earnings available for dividend declaration
Schedule 3 – Map of the relationships of companies within the Group
Schedule 4 – Financial soundness indicators
Schedule 5 – Supplementary schedules required by Annex 68-E
Interim Consolidated Financial Statements – March 31, 2014 and 2013
SEC Form 17-Q for the three months ended June 30, 2014
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FORWARD LOOKING STATEMENTS
This Prospectus contains forward-looking statements that are, by their nature, subject to significant risks
and uncertainties. These forward-looking statements include, without limitation, statements relating to:
 The Company‘s business and investment strategy;
 Its capital expenditure plans;
 Its dividend policy;
 Its financial condition and results of operations;
 The anticipated availability of bank and other forms of financing; and
 The industry outlook generally.
The words ―anticipate,‖ ―believe,‖ ―estimate,‖ ―expect,‖ ―intend,‖ ―seek,‖ ―plan,‖ ―may,‖ ―will,‖ ―would,‖ ―could‖
and similar expressions, as they relate to the Company, are intended to identify a number of these forwardlooking statements. These forward-looking statements are subject to risks, uncertainties and assumptions,
some of which are beyond the Company‘s control. In addition, these forward-looking statements reflect
current views of the Company with respect to future events and are not a guarantee of future performance.
Actual results may differ materially from information contained in the forward-looking statements as a result
of a number of factors, including:
 General economic, political and other conditions in the Philippines;
 The Company‘s management‘s expectations and estimates concerning its future financial performance;
 The Company‘s level of indebtedness;
 The Company‘s capital expenditure program and other liquidity and capital resources requirements;
 The size and growth of the Company‘s customer base;
 Inflation in the Philippines and any devaluation of the Peso;
 Existing and future governmental regulation; and
 The risk factors discussed in this Prospectus as well as other factors beyond the Company‘s control.
The Company does not intend to update or otherwise revise the forward-looking statements in this
Prospectus, whether as a result of new information, future events or otherwise, unless material within the
purview of the Securities Regulation Code (SRC) and other applicable laws, the mandate of which is to
enforce investor protection. Because of these risks, uncertainties and assumptions, the forward-looking
events and circumstances discussed in this Prospectus might not occur in the way the Company expects, or
at all. Investors should not place undue reliance on any forward-looking information.
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DEFINITION OF TERMS
As used in this Prospectus, the following terms shall have the meanings ascribed to them:
“Application to Purchase” shall mean the document to be accomplished by the applicants for the
application to purchase the Preferred Shares.
“Associate” shall refer to an entity, including unincorporated entity such as a partnership over which the
investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.
“Ayala” refers to Ayala Corporation.
“Ayala Group” refers to Ayala Corporation and its subsidiaries and affiliates.
“Banking Day” or “Business Day” shall be used interchangeably to refer to any day when commercial
banks and foreign exchange markets are open for business in the cities of Makati, Taguig or Metro Manila,
except Saturday and Sunday and any legal holiday not falling on either a Saturday or Sunday.
“Bankruptcy” means, with respect to any Person, (a) that such Person has (i) made an assignment for the
benefit of creditors; (ii) filed a voluntary petition in bankruptcy; (iii) been adjudged bankrupt, or insolvent; or
had entered against such Person an order of relief in any bankruptcy or insolvency proceeding; (iv) filed a
petition or an answer seeking for such Person any reorganization, arrangement, composition, readjustment,
insolvent, liquidation, dissolution or similar relief under any statute, law or regulation or filed an answer or
other pleading admitting or failing to contest the material allegations of a petition filed against such Person in
any proceeding of such nature; or (v) sought, consented to, or acquiesced in the appointment of a trustee,
receiver or liquidator of such Person or of all or any substantial part of such Person‘s properties; (b) 60 days
have elapsed after the commencement of any proceeding against such Person seeking reorganization,
arrangement, composition, readjustment, insolvent, liquidation, dissolution or similar relief under any statute,
law or regulation and such proceeding has not been dismissed; or (c) 60 days have elapsed since the
appointment without such Person‘s consent or acquiescence of a trustee, receiver or liquidator of such
Person or of all or any substantial part of such Person‘s properties and such appointment has not been
vacated or stayed or the appointment is not vacated within 60 days after the expiration of such stay.
“Beneficial Owner” shall mean any person (and ―Beneficial Ownership‖ shall mean ownership by any
person) who, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting of such
security; and/or investment returns or power in respect of any security, which includes the power to dispose
of, or to direct the disposition of, such security; provided, however, that a person shall be deemed to have an
indirect beneficial ownership interest in any security which is held by:
i. members of his immediate family sharing the same household;
ii. a partnership in which he is a general partner; or
iii. a corporation of which he is a controlling shareholder;
subject to any contract, arrangement or understanding, which gives him voting power or investment power with
respect to such securities; provided, however, that the following persons or institutions shall not be deemed to
be beneficial owners of securities held by them for the benefit of third parties or in customer or fiduciary
accounts in the ordinary course of business, so long as such securities were acquired by such persons or
institutions without the purpose or effect of changing or influencing control of the issuer:
a. A broker dealer;
b. An investment house registered under the Investment Houses Law;
c. A bank authorized to operate as such by the Bangko Sentral ng Pilipinas;
d. An insurance company subject to the supervision of the Office of the Insurance Commission;
e. An investment company registered under the Investment Company Act;
f. A pension plan subject to regulation and supervision by the Bureau of Internal Revenue and/or the
Securities and Exchange Commission or relevant authority; and
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g. A group in which all of the members are persons specified above.
“BIR” shall mean the Bureau of Internal Revenue.
“BHI” shall refer to Bethlehem Holdings, Inc.
“BMPL” shall refer to Bridge Mobile Pte, Ltd.
“BDO Capital” shall refer to BDO Capital & Investment Corporation, a corporation duly licensed and
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authorized to operate in the Philippines, with address at the 20 Floor, South Tower, BDO Corporate Center,
7899 Makati Avenue, Makati City.
“BPI” shall refer to Bank of the Philippine Islands, an affiliate of the Ayala Group.
“BPI Capital” shall refer to BPI Capital Corporation, a corporation duly licensed and authorized to operate in
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the Philippines, with address at the 8 Floor, BPI Building, Ayala Avenue corner Paseo de Roxas, Makati
City.
“BSP” shall mean Bangko Sentral ng Pilipinas.
“Dividend Payment Date” February 22 and August 22 of each year until the Redemption Date
“Government” shall refer to the Government of the Republic of the Philippines.
“Globe Group” shall refer collectively to Globe Telecom, Inc., Asticom Technology, Inc., Innove
Communications, Inc., G-Xchange, Inc., Entertainment Gateway Group Corporation, GTI Business Holdings,
Inc., Kickstart Ventures Inc.
“Issue Date” shall mean August 22, 2014 or such other date as may be agreed upon between the Issuer
and the Joint Lead Underwriters.
“Joint Lead Underwriters” shall refer to BPI Capital, BDO Capital, and SB Capital, the entities appointed
as joint lead managers and joint lead underwriters for the Shares pursuant to the Underwriting Agreement.
“Lien” shall mean any mortgage, pledge, lien or encumbrance constituted on any of the Issuer‘s properties
for the purpose of securing its or its Subsidiaries ‗obligations.
“Globe” or the “Company” or the “Issuer” shall refer to Globe Telecom, Inc.
“NTC” shall mean National Telecommunications Commission of the Philippines.
“Offer” shall mean the offering for subscription in the Philippines by the Company of 14,000,000 Preferred
Shares, with an Oversubscription Option of up to an additional 6,000,000 Preferred Shares.
“Offer Period” shall refer to the period, commencing on August 11, 2014 and ending on August 15, 2014.
“Offer Price” shall refer to P500 per Preferred Share.
“OFW” means Overseas Filipino Workers.
“Optional Redemption Date” shall refer to the Rate Re-Setting Date or any Dividend Payment Date
thereafter.
“Paying Agent” shall refer to BPI- Stock Transfer Office.
“PDTC” shall refer to the Philippine Depository & Trust Corporation.
“Pesos”, “P”, and “Philippine currency” shall mean the legal currency of the Republic of the Philippines.
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“Philippines” shall mean the Republic of the Philippines.
―PFRS” shall mean Philippine Financial Reporting Standards.
“Preferred Shares” shall refer to the non-voting, cumulative, perpetual Series A preferred shares of Globe
“PSE” shall refer to The Philippine Stock Exchange, Inc.
“PSE Trading Participant” shall refer to member-brokers of the PSE.
“Rate Re-Setting Date” shall refer to the Rate Re-Setting Date as defined under the Terms and Conditions
of the Offer
“Receiving Agent” shall refer to BPI-Stock Transfer Office
“Record Date” shall refer to the cut-off date in determining holders of the shares entitled to receive dividend
amount due.
“Redemption Date” shall refer to the date of actual redemption of the Preferred Shares by Globe.
“Registrar” shall refer to PDTC, being the registrar appointed by the Issuer.
“SB Capital” shall refer to SB Capital Investment Corporation, a corporation duly licensed and authorized to
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operate in the Philippines, with address at the 18 Floor, Security Bank Center, 6776 Ayala Avenue, Makati
City.
“SEC” means the Philippine Securities and Exchange Commission.
“SEC Permit” shall mean the Permit to Sell Securities issued by the SEC in connection with the Offer.
“Security Interest” shall mean mortgage, pledge, lien, charge, assignment, hypothecation or security
interest or any other agreement or arrangement having the effect of conferring security howsoever and
wherever created or arising and whether consensual or nonconsensual.
“Selling Agents” shall refer to PSE‘s duly-accredited member-brokers
“SIM” means subscriber identity module.
“SingTel” or ―STI‖ means Singapore Telecom Int‘l. Pte. Ltd.
“Subsidiary” shall mean, with respect to Globe, any corporation directly or indirectly controlled by it,
whether by way of ownership of at least 50% of the total issued and outstanding capital stock of such
corporation, or the right to elect at least 50% of the number of directors in such corporation, or the right to
control the operation and management of such corporation by reason of management, contract or authority
granted by said corporation to Globe.
“SRC” shall mean the Securities Regulation Code of the Philippines.
“Tax Code” shall mean the Tax Reform Act of 1997, as amended.
“Taxes” shall refer to any present or future taxes, including, but not limited to, documentary stamp tax,
levies, imposts, filing and other fees or charges imposed by the Republic of the Philippines or any political
subdivision or taxing authority thereof, including surcharges, penalties and interests on said taxes, but
excluding final withholding tax, gross receipts tax, taxes on the overall income of the underwriter or of the
Shareholders, value added tax, and taxes on any gains realized from the sale of the Shares.
“$” or “US$” shall refer to United States Dollars, being the currency of the United States of America.
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EXECUTIVE SUMMARY
The following summary is qualified in its entirety by the more detailed information and consolidated financial
statements and notes thereto appearing elsewhere in this Prospectus. Because it is a summary, it does not
contain all of the information that a prospective purchaser should consider before investing. Prospective
investors should read the entire Prospectus carefully, including the section entitled “Risk Factors and Other
Considerations” and the consolidated financial statements and the related notes to those statements
included in this Prospectus.
The Company
Globe Telecom, Inc. is a major provider of telecommunications services in the Philippines, supported by over
6,300 employees and over 890,000 retailers, distributors, suppliers, and business partners nationwide. The
Company operates one of the largest and most 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.
As of March 31, 2014, Globe had about 40.7 million mobile subscribers, over 2.2 million broadband
customers, and over 611,000 landline subscribers.
Globe is one of the largest and most profitable companies in the country, and has been consistently
recognized both locally and internationally for its corporate governance practices. Globe (as Globe Mackay
Cable and Radio Corporation) listed its common shares with the PSE on August 11, 1975, becoming the first
telecommunications company in the Philippines to go public. Its common shares are listed on the PSE under
the ticker symbol GLO and had a market capitalization of P221.0 billion as of June 19, 2014.
Globe created a new class of voting preferred shares in the year 2000. In 2001, Globe entered into a share
swap transaction with Asiacom and acquired Isla Communications Co., Inc. (―Islacom‖) by issuing
158,515,021 Globe preferred shares at par value in exchange for 1.08 billion common shares of Islacom.
These Voting Preferred Shares were listed on the PSE on June 29, 2001 under the ticker symbol, ―GLOPA‖.
The Company‘s principal shareholders are Ayala Corporation and Singapore Telecom, both industry leaders
in their respective countries. Aside from providing financial support, this partnership has created various
synergies and has enabled the sharing of best practices in the areas of purchasing, technical operations, and
marketing, among others.
Globe is committed to being a responsible corporate citizen. Globe BridgeCom, the company‘s umbrella
corporate social responsibility program, leads and supports various initiatives that (1) promote education and
raise the level of computer literacy in the country, (2) support entrepreneurship and micro-enterprise
development particularly in the countryside, and (3) ensures sustainable development through protection of
the environment and excellence in operations. Since its inception in 2003, Globe BridgeCom has made a
positive impact on the lives of thousands of public elementary and high school students, teachers,
community leaders, and 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;
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
Entertainment Gateway Group Corp. (EGG) is engaged in the development and creation of
wireless products and services accessible through telephones and other forms of communication
devices. It also provides internet and mobile value added services, information technology and
technical services including software development and related services;

GTI Business Holdings, Inc. (GTI) is a wholly-owned subsidiary with authority to provide VOIP
services. Its wholly-owned subsidiaries are: GTI Corporation (GTIC US), a company organized
under the General Corporation Law of the State of Delaware for the purpose of engaging in any
lawful act or activity, Globe Telecom HK Limited (GTHK), a limited company organized under the
Companies Ordinance of Hong Kong, Globetel European Limited and its subsidiaries namely:
UK Globetel Limited, Globe Mobile' Italy S.r.l. (GMI) and Globetel Internacional European
España, S.L. UK Globetel Limited is a private limited company under the Companies Act of
2006, wherein the registered address is in England and Wales; Globe Mobile' Italy S.r.l. (GMI), is
a limited liability company to perform, directly, and/or through its subsidiaries, services such as
voice calling, SMS, MMS, load top-up and mobile data to Filipinos based in, or visiting Italy with
registered address in Milan, Italy; Globetel Internacional European España, S.L. with registered
address in Barcelona, Spain;

Kickstart Ventures, Inc. (Kickstart), a wholly-owned subsidiary, is a pioneering business
incubator designed to provide aspiring technopreneurs with funds and facilities, mentorship and
market access needed to build new businesses. Flipside Publishing Services, Inc. a subsidiary is
40.94% owned by Kickstart; and,

Asticom Technology, Inc. a wholly-owned subsidiary, is a system integrator and information
technology services provider to domestic and international markets.
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 (CMTS-GSM), (c) nationwide local exchange carrier (LEC) services after
being granted a provisional authority in June 2005, and (d) international cable landing stations located in
Nasugbu, Batangas and Ballesteros, Cagayan.
Globe is organized along three key customer facing units (CFUs) tasked to focus on the integrated mobile
and fixed line needs of specific market segments. The Company has a Consumer CFU with dedicated
marketing and sales groups to address the needs of retail customers, and a Business CFU (Globe Business)
focused on the needs of big and small businesses. Globe Business provides 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. In early 2011, Globe organized an International Business Group to serve the
voice and roaming needs of overseas Filipinos, whether transient or permanent. It is tasked to grow the
Company‘s international revenues by leveraging on Globe‘s product portfolio and developing and capitalizing
on regional and global opportunities. Special perks may vary depending on the plan subscription.
Business Segments
Mobile Business
Globe provides digital mobile communication services nationwide using a fully digital network based on the
Global System for Mobile Communication (GSM) technology. It provides voice, data and value-added
services to its mobile subscribers through three major brands: Globe Postpaid, Globe Prepaid and TM.
Globe Postpaid includes all postpaid plans such as regular G-Plans and consumable G-Flex Plans, Load
Allowance Plans, Load Tipid Plans and Platinum Plans (for the high-end market). In 2010, the Company
introduced the MY SUPERPLAN and MY FULLY LOADED PLAN which allow subscribers to personalize
their plans, choose and combine various unlimited call, text and web browsing service options. In addition,
Globe has made available various add-on roaming and mobile browsing plans to cater to the needs of its
12
subscribers. In 2011, Globe further improved postpaid offerings with the All New My Super Plan where
subscribers are given the flexibility to create their own plans by either subscribing to an All-Unlimited Plan or
an All-Consumable Plan. Subscribers also get to choose their freebies and add-ons which they can change
on a monthly basis. A fully-customizable unlimited data plan (Unli Surf Combo Plan) was also made available
to its subscribers in mid-2011 which provides uninterrupted unlimited mobile surfing without the need for a
WIFI connection. The data plan comes with consumable amounts which the subscriber may use to either
local and international calls and text messages. Taking the product customization to the next level, the
company launched in the second quarter of 2013 the BEST-EVER MY SUPERPLAN with fully-customizable
plan components, bigger plan value and more contract periods to choose from (6, 12, 18, and 30 months).
Each plan has a corresponding ―peso value‖ that can be converted to avail of a combination of call, text, or
surf services, free or discounted gadgets, and a monthly consumable amount for more calls, texts and surf.
In November 2013, Globe Postpaid launched the iPhone Forever program bannering the latest phone from
Apple (iPhone 5s and iPhone 5c). Under the iPhone Forever program, new and existing Globe subscribers
who are loyal iPhone users may swap their current devices to get a new iPhone every year for free or with
minimal one-time cash out.
Globe Prepaid and TM are the prepaid brands of Globe. Globe Prepaid is focused on the mainstream market
while TM caters to the value-conscious segment of the market. Each brand is positioned at different market
segments to address the needs of the subscribers by offering affordable innovative products and services.
In February 2012, the Company introduced a self-service menu that provides Globe prepaid subscribers an
easy access to avail of the latest promos and services of Globe by simply dialing *143#. In early 2013, this
menu was further developed with Globe Prepaid‟s GO SAKTO which allows the subscribers to build their
own promos (call, text and surf promos) that is best suited for their needs and lifestyle.
Globe also provides its subscribers with mobile payments and remittance services under the GCash brand.
GCash transforms a mobile phone into a virtual wallet, enabling secure, fast, and convenient way to transfer
money at a cost of a text message. This service enables our subscribers to perform international and
domestic remittance transactions, pay fees, utility bills, income taxes, avail of micro-finance transactions,
donate to charitable institutions, and buy Globe prepaid reloads. A wide network of local and international
partnerships has been established over the years including government agencies, utility companies,
cooperatives, insurance companies, remittance companies, and commercial establishments, in order to
make GCash an accepted mode of payment for various products and services.
Globe Prepaid and TM subscribers can reload airtime value or credits using various reloading channels
including prepaid call and text cards, bank channels such as ATMs, credit cards, and through internet
banking. Subscribers can also top-up via AutoLoad Max retailers nationwide, all at affordable denominations
and increments. A consumer-to-consumer top-up facility, Share-A-Load, is also available to enable
subscribers to share prepaid load credits via SMS.
Globe has a loyalty and rewards program called My Rewards, My Globe for Globe Prepaid subscribers, TM
Astig Rewards for TM subscribers and Tattoo+ Rewards for Tattoo Broadband subscribers. Globe Postpaid
subscribers can earn points based on their monthly billed amounts in excess of their Monthly Subscription
Fee. Subscribers have the option to redeem rewards instantly, or accumulate points to avail of higher value
rewards. Redeemed points in the form of telecom services is netted out against revenues whereas points
redeemed in the form of non-telco services such as gift certificates and other products are reflected as
marketing expense. At the end of each period, Globe estimates and records the amount of probable future
liability for unredeemed points.
In 2014, Globe Postpaid recently launched the Globe Blue or Platinum Rewards Cards. The new cards can
also work as a GCash Mastercard which can be used to shop anywhere within the Philippines and even
abroad. Membership to Globe Blue is given to postpaid customers who spend an average of P2,000 to
P3,499 per month over a 12-month period. Meanwhile membership to the Globe Platinum is given to
postpaid customers who subscribe to plan P3,799 or spend an average of P3,500 to P4,999 over a 12month period; and membership to Platinum Elite Rewards card is given to postpaid customer who subscribe
to All Net P5,000 or P10,000; roaming P5,000 or P10,000 or spend an average of P5,000 and above over a
12-month period. Special perks may vary depending on the plan subscription. Special perks may vary
depending on the plan subscription.
13
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-peruse rates, subscribers can choose from bulk and unlimited voice offerings for all-day or off-peak use, and in
several denominations to suit different budgets.
Globe keeps Filipinos connected wherever they may be in the world, made possible by its tie-up with over
700 roaming partners in more than 200 calling destinations worldwide. Globe also offers roaming coverage
on-board selected shipping lines and airlines, via satellite. Through its Globe Kababayan program, Globe
provides an extensive range of international call and text services to allow OFWs (Overseas Filipino
Workers) to stay connected with their friends and families in the Philippines. This includes prepaid and
reloadable call cards and electronic PINs available in popular OFW destinations worldwide.
Mobile SMS, Mobile Browsing and Value-Added Services
Globe‘s Mobile SMS service includes local and international SMS offerings. Globe also offers various bucket
and unlimited SMS packages to cater to the different needs and lifestyles of its postpaid and prepaid
subscribers.
Globe‘s mobile browsing services allow subscribers to access the internet using their internet-capable
handsets, devices or laptops with USB modems. Data access can be made using various technologies
including HSPA+, 3G with HSDPA, EDGE and GPRS. Browsing subscribers also have multiple charging
options available with Globe‘s Flexible Mobile Internet Browsing rates which allow subscribers to choose
between time or usage-based rates. They can also choose between hourly, daily or monthly browsing plans.
Globe‘s Value-Added Services offers a full range of downloadable content covering multiple topics including
news, information, and entertainment through its web portal. Subscribers can purchase or download music,
movie pictures and wallpapers, games, mobile advertising, applications or watch clips of popular TV shows
and documentaries as well as participate in interactive TV, do mobile chat, and play games, among others.
Additionally, Globe subscribers can send and receive Multimedia Messaging Service (MMS) pictures and
video, or do local and international 3G video calling.
Through Globe‘s partnership with major banks and remittance companies, and using Globe‘s pioneering
GCash platform, subscribers can perform mobile banking and mobile commerce transactions. Globe
subscribers can complete international and domestic remittance transactions, pay fees, utility bills and
income taxes, avail of micro-finance transactions, donate to charitable institutions, and buy Globe prepaid
load credits using its GCash-activated SIM.
Fixed Line and Broadband Business
Globe offers a full range of fixed line communications services, wired and wireless broadband access, and
end-to-end connectivity solutions customized for consumers, SMEs (Small & Medium Enterprises), large
corporations and businesses.
Fixed Line Voice
Globe‘s fixed line voice services include local, national and international long distance calling services in
postpaid and prepaid packages through its Globelines brand. Subscribers get to enjoy toll-free rates for
national long distance calls with other Globelines subscribers nationwide. Additionally, postpaid fixed line
voice consumers enjoy free unlimited dial-up internet from their Globelines subscriptions. Low-MSF (monthly
service fee) fixed line voice services bundled with internet plans are available nationwide and can be
customized with value-added services including multi-calling, call waiting and forwarding, special numbers
and voice mail. For corporate and enterprise customers, Globe offers voice solutions that include regular
and premium conferencing, enhanced voice mail, IP-PBX solutions and domestic or international toll free
services.
14
Fixed Line Data
Fixed line data services include end-to-end data solutions customized according to the needs of businesses.
Globe‘s product offerings include international and domestic leased line services, wholesale and corporate
internet access, data center services and other connectivity solutions tailored to the needs of specific
industries.
Globe‘s international data services provide corporate and enterprise customers with the most diverse
international connectivity solutions. Globe‘s extensive data network allow customers to manage their own
virtual private networks, subscribe to wholesale internet access via managed international private leased
lines, run various applications, and access other networks with integrated voice services over high-speed,
redundant and reliable connections. In addition to bandwidth access from multiple international submarine
cable operators, Globe also has two international cable landing stations situated in different locales to ensure
redundancy and network resiliency.
The Company‘s domestic data services include data center solutions such as business continuity and data
recovery services, 24x7 monitoring and management, dedicated server hosting, maintenance for applicationhosting, 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 premium-grade access solutions combining voice, broadband and
video offerings designed to address specific connectivity requirements. These include Broadband Internet
Zones (BIZ) for broadband-to-room internet access for hotels, and Internet Exchange (GiX) services for
bandwidth-on-demand access packages based on average usage.
Globe Business also launched in 2013 new cloud capabilities featuring the first large-scale, private and
public-ready, next generation cloud in Asia - the PayrollCloud application, an innovative Software-as-aService or SaaS providing on-time and accurate payroll accounting system – from automatic calculation of
salaries, standard time and attendance reports, biometric integration, online application and customizable
approval hierarchy and online payslip access. Another is its Backup-as-a-Service platform which is the most
advanced backup and restoration software, that enables continuous data protection, local off-site storage
and managed services to industries, enterprises as well as small and medium businesses.
Broadband
Globe offers wired, fixed wireless, and fully mobile internet-on-the-go services across various technologies
and connectivity speeds for its residential and business customers. Tattoo@Home consists of wired or DSL
broadband packages bundled with voice, or broadband data-only services which are available at download
speeds ranging from 1 mbps up to 15 mbps. In selected areas where DSL is not yet available, Globe offers
Tattoo WiMAX, a fixed wireless broadband service using its WiMAX network. Meanwhile, for consumers
who require a fully mobile, internet-on-the-go broadband connection, Tattoo On-the-Go allows subscribers to
access the internet using HSPA+, 3G with HSDPA, EDGE, GPRS or Wi-Fi at various hotspots nationwide
using a plug-and-play USB modem. This service is available in both postpaid and prepaid packages. In
addition, consumers in selected urban areas who require faster connections have the option to subscribe to
Tattoo Torque broadband plans using leading edge GPON (Gigabit Passive Optical Network) technology
with speeds of up to 100 mbps.
In September 2012, the Company officially launched its Long-Term Evolution (LTE) broadband service with
the Tattoo Black Postpaid Plans. The nomadic broadband plans are equipped with an LTE dongle and LTE
superstick that deliver browsing speeds of up to 42 Mbps and come with personalized customer handling
services such as a dedicated hotline, a relationship manager, and many other perks.
In 2013, Tattoo introduced its 4G product suite with the launch of Tattoo 4G Flash for only P995 with surfing
speeds of up to 7.2 Mbps. Tattoo At-Home on the other hand, offered free unlimited calls to Globe/TM in
every Tattoo@Home Broadband Bundle (landline + internet service). Meanwhile, Tattoo Postpaid
strengthens its lifestyle positioning with the unveiling of Tattoo-Enjoy Card which allows new Tattoo Postpaid
subscribers access to perks and discounts to over 240 brand partners nationwide. Likewise, Tattoo Prepaid
Lifestyle sticks with surfing speed of up to 12 Mbps on the other hand was made available to consumers for
only P1,295. With the increasing demand for mobile Wi-Fi and faster internet connectivity, Tattoo Prepaid re15
launched its 4G SuperStick during the third period of 2013 with a more affordable price of P1,995. Tattoo
Postpaid also launched its new and improved postpaid personalized and consumable plans with increased
surfing speed now up to 42 Mbps. LTE plans starting at P1,299 was made available with FREE LTE dongle
or pay a one-time fee of P2,000 for an upgrade to a mobile Wi-Fi device. Tattoo consumable plans were
further improved with more browsing hours (from 30 hours to 50 hours) for Plan 299 and for Plan 499 (from
50 hours to 85 hours) also with an option to upgrade to a mobile Wi-Fi device for only P150 per month.
Another Tattoo revolutionary promo offer during 2013 was the most affordable tablet bundles, wherein its
subscribers can get FREE three devices (Skyworth S73 tablet or a Cloudpad 705W, a Blackberry Curve
9220 and the fastest broadband Wi-Fi stick) with unlimited internet browsing and mobile text and call starting
at Plan 1,298.
16
SUMMARY FINANCIAL INFORMATION
The following tables present summary financial information of the Company and its Subsidiaries (or “Globe
Group”) and should be read in conjunction with the annual audited consolidated financial statements and the
unaudited interim condensed consolidated financial statements contained in this Prospectus and the section
entitled “Management Analysis and Discussion of Financial Condition and Results of Operations." The 2012
and 2011 financial statements have not been revised to reflect Globe Group‟s adoption of the amendments
to Philippine Accounting Standards (“PAS”)19: Employee Benefits, effective January 1, 2013 with
retrospective application
Results of Operations (P Million)
Net Operating Revenues ………………………………………...….
Service Revenues……………………………………………….…..
Mobile ………………………………………………………….....
Broadband……………………………………………………...….
Fixed line Data………………………………………………...…..
Fixed line Voice ……………………………………………….…
Non-Service Revenues………………………………………….….
Costs and Expenses ………………………………………………...
Cost of Sales…………………………………………………………
1
Operating Expenses ……………………………………………..
4
EBITDA ………………………………………………………………
EBITDA Margin………………………………………………………..
Depreciation……………………………………………………………
Affected by network modernization………………………………..
Others…………………………………………………………………
EBIT …………………………………………………………………….
EBIT Margin……………………………………………………………
1
Non-Operating Charges ……………………..……………………..
1
Net Income After Tax (NIAT) ……………………………………..
2
Core Net Income …………………………………………………….
1
Globe Group
For the three
For the Years
months Ended
Ended December 31
March 31
2014
2013
2013
2012
24,360
23,230
18,456
2,790
1,319
665
1,130
15,564
2,867
12,697
8,796
38%
4,068
512
3,556
4,728
20%
(422)
2,949
3,357
22,470
21,368
17,124
2,486
1,111
647
1,102
13,694
2,707
10,987
8,776
41%
7,407
3,062
4,345
1,369
6%
(503)
656
3,086
95,141
90,500
72,764
10,440
4,691
2,605
4,641
58,627
9,953
48,674
36,514
40%
27,478
9,066
18,412
9,036
9%
2,172
4,960
11,617
86,446
82,742
67,189
8,721
4,167
2,665
3,704
51,432
7,679
43,753
35,014
42%
23,584
5,080
18,504
11,430
13%
1,678
6,845
10,264
2012 operating expenses/ non-operating charges have been restated to reflect the adoption of amendments to PAS 19.
2
Core net income is net income after tax (NIAT) but excluding foreign exchange and mark-to-market gains (losses), and non-recurring
items
3
Handset/SIM subsidies represent the difference between the sales price collected from the subscriber and the original cost of the
handset or SIM or cost of sales less non-service revenues.
4
EBITDA (Earnings before Interest Taxes, Depreciation and Amortization) is calculated as service revenues less subsidy 3and operating
expenses. This measure provides useful information regarding a company‟s ability to generate cash flows, incur and service debt,
finance capital expenditure and working capital changes. As the Globe‟s method of calculating EBITDA may differ from other
companies, it may not be comparable to similarly titled measures presented by other companies.
17
Liquidity and Capital Resources
31-Mar
2014
Globe Group
31-Mar
31-Dec
2013
2013
31-Dec
2012
Balance Sheet Data (P Million)
1
Total Assets ………………………..…………
2
Total Debt ……………………………………
1
Total Equity …………………………………...
160,029
69,884
39,667
146,573
64,424
41,968
159,079
69,301
41,639
148,012
61,779
45,698
Financial Ratios (x)
Total Debt to EBITDA …………………..……
Debt Service Coverage………………………
Interest Cover (Gross) ………….……………
Debt to Equity (Gross) …………………….…
3
Debt to Equity (Net) ………………………...
Total Debt to Total Capitalization (Book) …
Total Debt to Total Capitalization (Market) ..
Total Asset to Equity Ratio…………………..
Current Ratio………………………………….
Solvency Ratio………………………………..
1.91
2.23
12.92
1.76
1.60
0.64
0.24
4.03
0.64
0.52
1.84
3.52
12.76
1.54
1.38
0.61
0.29
3.49
0.68
0.54
1.90
2.83
12.54
1.66
1.49
0.62
0.24
3.82
0.65
0.53
1.78
2.02
12.02
1.35
1.20
0.57
0.30
3.24
0.74
0.57
Profitability Margins
EBITDA Margin………………………………..
Net Profit Margin………………………………
Return on Equity………………………………
38%
12.10%
29%
41%
2.90%
6%
40%
5.2%
11%
42%
7.9%
14%
1
2012 total assets/ total equity have been restated to reflect the adoption of amendments to PAS 19.
Total debt is composed of e.g. interest bearing debt, notes payable, and long term debt.
3
Net debt is calculated by subtracting cash, cash equivalents and short term investments from total debt.
2
Summary Financial Highlights for Globe’s subsidiaries
The following tables present summary financial information of Globe‘s and the Company‘s subsidiaries
(P thousands):
Globe Telecom Inc. - Parent
2013
2012
2011
Current assets……………………….
29,843,482
29,630,553
19,729,564
Noncurrent assets…………………..
119,874,429
109,577,001
100,941,570
Total assets………………………….
149,717,911
139,207,554
120,671,134
Current liabilities……………………
46,333,782
38,999,797
32,422,929
Noncurrent liabilities……………….
62,332,787
56,153,194
43,298,651
Total liabilities……………………….
108,666,569
95,152,991
75,721,580
Revenues……………………………
79,398,858
71,745,768
64,971,738
Cost and Expenses…………………
72,432,954
61,641,183
50,672,582
Net Income………………………….
6,000,500
7,858,076
10,452,629
18
Innove Communications, Inc.
2013
2012
2011
7,408,067
7,453,200
7,658,598
21,679,940
21,786,197
22,789,723
29,088,007
29,239,397
30,448,321
11,059,231
10,274,717
10,552,644
112,828
113,013
135,070
11,172,059
10,387,730
10,687,714
Revenue…………………………….
15,160,126
13,997,675
13,624,967
Cost and expenses………………..
12,272,911
11,756,766
12,142,590
Net income…………………………
2,064,292
1,590,690
1,061,403
1
The selected financial data as of and for the year ended December 31, 2011 discussed herein were derived from the December 31,
2012 audited financial statements of the subsidiary which have not been restated to include the effects of the adoption of PAS 19.
G-Xchange, Inc.
2013
Current assets………………………
2012
4,539,521
2011
2,493,700
1,487,534
23,300
54,854
47,378
4,562,821
2,548,554
1,534,911
4,146,099
2,217,874
1,355,846
13,524
2,018
772
4,159,623
2,219,892
1,356,618
Revenue…………………………….
199,234
231,440
150,861
Cost and expenses………………..
93,030
93,559
89,761
Net income………………………….
74,573
150,046
51,609
1
GTI Business Holdings, Inc.
2013
2012
2011
94,365
3,061
2,490
Noncurrent assets………………….
571,262
434,413
414,319
665,627
437,474
416,809
2,685
1,443
1,068
399
-
-
Total liabilities………………………
3,084
1,443
1,068
Revenue…………………………….
13,425
1,598
41
Cost and expenses…………………
9,145
1,270
1,236
Net income………………………….
3,525
289
(1,204)
Noncurrent liabilities………………
19
EGG
2013
2012
2011
326,604
159,475
118,947
Noncurrent assets………………….
21,819
15,740
11,343
348,423
175,215
130,290
136,866
63,768
86,114
4,383
2,689
5,809
141,249
66,457
91,923
607,338
306,345
241,311
324,154
209,762
165,250
198,276
67,633
54,634
1
KVI
2013
2012
2011
36,589
36,020
-
Noncurrent assets…………………...
76,076
23,234
-
112,664
59,254
-
13,253
18,745
-
-
-
-
13,253
18,745
-
25,178
7,008
-
25,753
6,955
-
(598)
10
-
Share of Globe’s subsidiaries in its net income for the past 3 years
Illustrated below is the share of Globe‘s subsidiaries in its net income for the years 2011 to 2013
Globe - Parent & Subsidiaries
Net Income/(Losses)
(P Millions)
2013
Globe - Parent
Subsidiaries
Intercompany
elimination
Consolidated Net
Income
2012
2011
6,001
2,340
7,858
1,809
10,453
1,166
(3,380)
(2,821)
(1,815)
4,960
6,845
9,805
*Intercompany elimination is inclusive of dividend declaration of Innove Communications, Inc.
amounting to 2013- P3.0 Bn, 2012- P2.5 Bn and 2011- P1.5 Bn.
Other Developments
Last February 2013, Globe obtained approval from its Board of Directors to invest in a Philippine entity to be
named as Taodharma, Inc. to explore growth opportunities in the mobile market.
In March 2013, Globe entered into a Shareholders Agreement among four other entities to incorporate
Taodharma Inc. (―Tao‖). Globe subscribed for the 25% preferred shares of Tao amounting to P55.00 million
which has been fully paid up as of August 2013. Tao shall carry on the business of establishing, operating
and maintaining retail stores in strategic locations within the Philippines that will sell telecommunications or
internet-related services, and devices, gadgets, accessories or embellishments in connection and in
accordance with the terms and conditions of the Dealer Agreement executed among all of the entities.
20
Globe also entered into an exclusive dealership arrangement with Tao that included provisions to build and
open retail outlet stores scattered across in cities and other major high-traffic locations nationwide.
ABS-CBN Deal
On 27 May 2013, Globe, Innove and ABS-CBN Convergence Inc. (―ABS-C‖ and formerly known as
Multimedia Telephony Inc.) have entered into a network sharing arrangement in order to provide capacity
and coverage for new mobile telephony, data and value-added services to be offered by ABS-C nationwide
to its subscribers using shared network and interconnect assets of the parties.
Under the network sharing arrangement, Globe and Innove will provide network capacity and coverage to
ABS-C on a nationwide basis and connect ABS-C‘s prepaid and postpaid billing, and customer service
management system to the network resources to be provided by Globe and Innove. The parties shall use
and where necessary, share existing network elements/resources and interconnect assets including
switches, servers, towers, and radio elements. The parties will accordingly notify the National
Telecommunications Commission of this arrangement.
This arrangement will enable Globe Telecom, Innove and ABS-C to improve public service by enhancing
utility, capacity, inter-operability and quality of mobile and local exchange telephony and data services to the
public and allow ABS-C to modernize its existing service and expand to a retail base on top of its existing
subscriber base.
On May 31, 2013, NTC approved the network sharing agreement and co-use of the number blocks assigned
to Globe Telecom.
Bayantel Update
Globe Telecom, Inc. and Bayan Telecommunications, Inc. (―BTI‖) obtained approval from the NTC for the
joint use of the frequencies 1750-1760 MHz / 1845-1855 MHz originally assigned to BTI. The joint-use
agreement will enable Globe to address increasing demand for voice, short message and mobile data
services, and allow BTI to be able to offer mobile-telecommunications services nationwide.
In another development, the Company announced in November 2012 that it has obtained the approval by its
Board of Directors to commence offers to purchase (the ―Debt Offers‖) up to 100% of the financial obligations
of BTI and subsidiary Radio Communications of the Philippines, Inc. (―RCPI‖) to their respective financial
creditors. The Debt Offers were concluded last 22 December 2012, wherein Globe secured the acceptance
of 93.66% of the holders of the unsecured financial indebtedness of BTI under the US$ 13.5% bonds
originally due in 2006; 98.26% of the outstanding other financial indebtedness owed by BTI; and 100% of the
outstanding financial indebtedness owed by RCPI, based on outstanding aggregate principal amount under
the terms of the rehabilitation plan of BTI and RCPI. BTI has been subject to court-supervised rehabilitation
proceedings since 2003. The current rehabilitation plan anticipates that BTI and RCPI will remain in
rehabilitation until 2023. Globe intends to apply with the rehabilitation court to amend the terms of the
rehabilitation plan in the interest of assuring BTI‘s long-term sustainability.
Meanwhile, Globe has also commenced separate discussions with the controlling shareholders of BTI
regarding a wide range of commercial arrangements including a potential acquisition by Globe of an equity
interest in BTI. The approval of the National Telecommunications Commission is required to complete the
acquisition. The parties remain in discussions on the terms of the commercial arrangements including the
price and other conditions under which the acquisition may be effected. No definitive arrangement has been
executed at this time.
Subsequently, last May 30, 2013, Globe, Bayan Telecommunications Holdings Corporation, the controlling
shareholder of BTI, and BTI jointly filed a motion with the court having jurisdiction over BTI 's debts. The
motion seeks to significantly restructure BTI 's financial debt in order to prevent the recurrence of default and
ensure BTI's continued viability. Following Globe's tender offers for the BTI debt in 2012, Globe currently
holds approximately 96.5% of the total financial indebtedness of BTI. The joint motion is intended to achieve
a successful rehabilitation of BTI at the earliest possible date.
The current outstanding principal amount of this debt is approximately the equivalent of US$423.3 million.
BTI's operations have not generated sufficient revenue to continue making the debt payments under its
existing rehabilitation plan. This has been attributed to a decline in revenue from traditional fixed line
21
services offered by BTI, increasing competitive pressures in the telecommunications industry and BTI's
inability to make any considerable capital investments while under its high debt burden. The restructuring
would, upon confirmation by the court, significantly decrease this through a conversion of up to 69% of the
debt into BTI shares. As restructured, the outstanding principal debt balance would be reduced to
approximately US$131.3 million, assuming the debt to equity conversions occur to their fullest extent. The
restructuring, including the debt to equity conversion feature, would apply to all of BTI‘s creditors equally
upon receipt of certain regulatory approvals, including the confirmation of the court.
By acquiring the BTI debt, Globe sought to enable BTI's continued viability as a telecommunications
provider. For Globe's part, such a restructuring would allow Globe to further strengthen collaborative efforts
with BTI in respect of their local exchange networks, corporate data and broadband businesses. Ensuring
that BTI remains a going concern would allow both companies to become more competitive in the current
industry environment. On the part of BTI, a restructuring of its debt and the entry of Globe as a shareholder
as well as a Creditor will enable BTI to unlock and maximize potential of its key business assets and
capabilities, and help accelerate its rehabilitation. Globe appreciates further that BTI's continued operations
benefits all of its employees, suppliers, stakeholders and public telecommunications customers in the
Philippines as a whole.
On September 2013, Globe received a Resolution issued by Branch 158 of the Regional Trial Court in Pasig
City. This is the court having jurisdiction over the debts of BTI and its corporate rehabilitation proceedings.
The Resolution granted the joint motion filed by Globe and BTI to amend current debt restructuring plan and
implement a new Master Restructuring Agreement for all BTI‘s creditors. The Amendments principally
involve a conversion of up to 69% of the debt into BTI shares comprising up to 56.6% of BTI‘s capital stock,
on a fully diluted basis. Assuming that debt to equity conversion occur to their fullest extent, the Amendments
will reduce BTI‘s outstanding principal debt by 69% from the equivalent of approximately US$423.3 to
approximately US$131.3 million. The Amendments also facilitate the entry of Globe into BTI as a
shareholder and are expected to assure BTI‘s successful rehabilitation. In addition to Globe, the debt to
equity conversion of the new debt restructuring terms will apply to all BTI‘s creditors.
On October 1, 2013, Globe Telecom acquired 38% interest in BTI following the conversion of its
unsustainable debt (Tranche B) into 45 million common shares based on the confirmation of the court dated
August 27, 2013 of the Amended Rehabilitation Plan. Globe Telecom will further convert its share of the
Tranche A debt upon certain regulatory approvals. Globe Telecom‘s acquisition of BTI is intended to
increase its current data and DSL businesses using BTI‘s existing platform.
As of March 31, 2014, the equity in BTI was recognized as investment in an associate carried at acquisition
cost valued at nil. BTI remains in a capital deficiency after Tranche B conversion with a negative book value
of common shares at P47.45 per share.
The accumulated unrecognized share in net loss and other comprehensive income as of March 31, 2014
amounted to P488.68 million and P31.88 million, respectively.
Details on these transactions have been extensively discussed in the disclosures filed with the SEC and PSE
and may be accessed from the PSE and Company websites.
Asticom Technology, Inc.
On June 3, 2014, Globe signed an agreement with Azalea Technology, Inc. and SCS Computer Systems,
acquiring the entire ownership stake in Asticom. Asticom, a systems integrator and information technology
services provider to domestic and international markets, is 49% owned by Azalea, a 100%-owned subsidiary
of Ayala Corporation and 51% owned by SCS Computer Systems, a subsidiary of Singapore Telecom.
Globe‘s acquisition of Asticom is in line with its strategy to expand its business operations in the information
technology space.
NTC Memorandum Circular
On October 10, 2011, the NTC issued Memorandum Circular No. 2-10-2011 titled Interconnection Charge for
Short Messaging Service requiring all public telecommunication entities to reduce their interconnection
charge to each other from P0.35 to P0.15 per text, which Globe complied with as early as November 2011.
22
On December 11, 2011, the NTC One Stop Public Assistance Center (OSPAC) filed a complaint against
Globe, Smart, and Digitel alleging violation of the said MC No. 02-10-2011 and mandating a reduction in the
SMS off-net retail price from P1.00 to P0.80 per text. Globe filed its Answer maintaining the position that the
circular did not require a reduction in the retail rate, only the interconnection charge; that SMS is a value
added service (VAS) which, under the NTC's own circular issued in 2008, is deregulated; and that a
reduction of the SMS interconnection charge does not automatically translate to a reduction in the SMS retail
charge per text.
On November 20, 2012, the NTC rendered a decision directing Globe to:
1. Reduce its REGULAR SMS Retail rate from P1.00 to not more than P0.80
2. Refund/reimburse its subscribers the excess charge of P0.20
3. Pay a fine of P200.00 per day from December 1,2011 until date of compliance.
On May 7, 2014, NTC denied the Motion for Reconsideration (MR) filed by Globe last December 5, 2012 in
relation to the November 20, 2012 decision. Globe stands on its legal position that it is compliant with the
NTC’s Memorandum Circular No. 02-10-2011 and did not violate said circular when it did not reduce the
SMS retail rate. On June 9, 2014, Globe filed its petition for review of the assailed NTC decision and
resolution denying Globe's MR with the Court of Appeals.
Please refer to the section on Legal Proceedings found in pages 99-102 of the Prospectus for further
discussion on this matter.
Recent Developments
Last August 5, the Board of Directors of the company has approved the declaration of the third quarter cash
dividend of P18.75 per common share payable on September 4, 2014 to shareholders on record as of
August 19, 2014. The third quarter cash dividend payment total is about P2.5 billion. On an annualized
basis, this represents about 86% of 2013 core net income.
On August 5, 2014, the Company disclosed its quarterly report for the quarter ended June 30, 2014.
The Globe Group‘s consolidated service revenues for the first half of the year improved by 7% to reach
P47.7 billion from P44.5 billion last year.
Globe ended the first semester of 2014 with consolidated net income of P6.8 billion, almost five times the
P1.4 billion net income recorded in the same period last year. This improvement in net income was driven
by higher EBITDA, lower depreciation charges, foreign exchange gain and lower interest expenses
recognized during the period. Excluding the non-recurring accelerated depreciation expenses and foreign
exchange and mark-to-market gains and losses, core net income after tax reached P7.6 billion as of end
June of 2014, an 18% increase from the P6.4 billion in the same period last year. On a sequential basis,
consolidated net income improved by 32% to P3.9 billion from P2.9 billion last quarter, given the EBITDA
growth and lower non-operating charges. Core net income after tax likewise increased by 26% to P4.2
billion from last quarter's P3.4 billion.
Globe's current ratio was at 0.68:1 as of 30 June 2014 and 0.66:1 as of 30 June 2013, which are at par with
industry standards. While Globe's average current ratio was below the SEC's minimum of 1:1, Globe
believes it has more than sufficient cash flows from operations to meet its debt maturities, currently and
prospectively.
The said quarterly report is appended to this Prospectus. Prospective investors should read the entire
Prospectus carefully, including the consolidated financial statements and the related notes to those
statements included in this Prospectus.
23
THE OFFER
Globe, through the Underwriters and Selling Agents named herein, is offering for sale to the public
14,000,000 Preferred Shares, with an Oversubscription Option of up to an additional 6,000,000 Preferred
Shares with a par value of P50.00 per share, at an Offer Price of P500.00 per share. The Offer
comprises Preferred Shares to be issued from the Company‘s 40,000,000 authorized and unissued
Non-Voting Preferred Share Capital. The Shares are being offered for subscription solely in the
Philippines.
As of June 15, 2014, the Company has an authorized common share capital of 148,934,373 shares,
Non-Voting Preferred stock of 40,000,000 shares, and voting preferred share capital stock of
160,000,000 shares. After the Offer, a n d a ssu m in g th e O ve rsu b scriptio n O ption is e xer cise d
in fu ll, the Company will have 132,680,427 common shares, 20,000,000 Non-Voting Preferred
Shares, and 158,515,021 Voting Preferred Shares, issued and outstanding.
The Offer
: 14,000,000 Preferred Shares, with an Oversubscription Option of up to
an additional 6,000,000 Preferred Shares
Offer Price
: P500.00 per share.
Terms of Payment
: Full payment upon application.
Minimum Subscription
: One hundred (100) Shares. Additional Preferred Shares may be bought
in multiples of ten (10) shares.
Offer Period
: The Offer Period will commence on 9:00 am of August 11, 2014 and end at
5:00 p.m. on August 15, 2014 unless shortened or extended by agreement
among the Company and the Underwriters, subject to the approval of the
SEC and the PSE (see ―Summary of the Offering‖).
USE OF PROCEEDS
The net proceeds from the Offer is estimated to be P6,923,056,788.98, or P9,893,766,466.40 if the
Oversubscription is exercised in full, after deducting expenses related to the Offer. Said expenses are
as follows:
SEC Registration Fees
PSE Listing Fees
Documentary Stamp Tax
Underwriting, and Selling Fees
Professional Expenses
Other related expenses
Total
P
P
P
P
P
P
P
Without
Oversubscription
3,093,125.00
7,056,000.00
35,000,000.00
26,344,086.02
4,550,000.00
900,000.00
76,943,211.02
With
Oversubscription
3,093,125.00
10,056,000.00
50,000,000.00
37,634,408.60
4,550,000.00
900,000.00
106,233,533.60
The proceeds shall be used to partially fund the Company‘s capital expenditure requirements for 2014.
A detailed discussion on the proceeds of the Offer appears on the ―Use of Proceeds‖ of this Prospectus.
24
STATISTICS RELATING TO THE PREFERRED SHARES
Total authorized number of Non-Voting
Preferred Shares as of June 5, 2014
40,000,000
Total number of Non-Voting Preferred Shares
outstanding after the Offer, assuming the
Oversubscription Option is exercised in full
20,000,000
25
SUMMARY OF THE OFFER
The following does not purport to be a complete listing of all the rights, obligations, and privileges attaching to
or arising from the Series A Perpetual Preferred Shares. Some rights, obligations, or privileges may be further
limited or restricted by other documents and subject to final documentation. Prospective investors are
enjoined to perform their own independent investigation and analysis of the Company and the Series A
Perpetual Preferred Shares. Each prospective investor must rely on its own appraisal of the Company and
the Series A Perpetual Preferred Shares and its own independent verification of the information contained
herein and any other investigation it may deem appropriate for the purpose of determining whether to invest in
the Series A Perpetual Preferred Shares and must not rely solely on any statement or the significance,
adequacy, or accuracy of any information contained herein. The information and data contained herein are
not a substitute for the prospective investor‟s independent evaluation and analysis.
The Offer................................ Globe, through the Underwriters and Selling Agents named
herein, is offering 14,000,000 Preferred Shares, with an
Oversubscription Option of up to an additional 6,000,000
Preferred Shares with a par value of P50.00 per Share at an
offer price of P500.00 per Share (the ―Offer Price‖).
Dividend Rate ....................... The Shares will, subject to the Dividend Payment Conditions (see
below), bear cumulative non-participating dividends based on the
Offer Price, payable semi-annually in arrears on the Dividend
Payment Date (as defined below) at the rate of 5 . 2 0 0 6 % per
annum from the Issue Date, as may be subsequently adjusted on
a Rate Re-Setting Date (as defined below). Dividends will be
calculated on a 30/360-day basis.
Rate Re-Setting Date ............ Unless such date is a Redemption Date, the Dividend Rate will be
re-set on the following date:
th
the payment date of the fourteenth (14 ) Dividend Period (the ―ReSetting Date‖) indicatively seven (7) years from Issue Date;
Dividend Rate
On and from the Rate Re-Setting Date, the Dividend Rate for all
Adjustments .......................... following Dividend Periods (as defined below), shall be the higher
of:
(a) the prevailing Dividend Rate on such Re-Setting Date; or
(b) the sum of:
(i) the Reference Rate; and
(ii) the Step Up Spread.
Reference Rate ..................... The simple average of the closing per annum rates of the 10-year
PDST-R2 (or any such successor rate generally accepted by the
market or a self-regulating organization ("SRO")), for three (3)
consecutive days ending on (and including) the Rate Re-Setting Date
as shown on the PDEX page (or such successor page) of Bloomberg
(or such successor electronic service provider).
Step-Up Spread .................... As relevant, the fixed per annum rate to be used for calculating any
Dividend Rate Adjustments at the Rate re-Setting Date: 3.25% per
annum.
Conditions for the
Globe has full discretion over the declaration and payment of
Declaration and Payment
dividends on the Shares, to the extent permitted by law.
of Dividends .......................... Globe‘s Board of Directors will not declare and pay dividends on
any Dividend Payment Date where (a) payment of the dividend
would cause Globe to breach any of its financial covenants; or (b)
26
the unrestricted retained earnings available to Globe for distribution
as dividends are not sufficient to enable Globe to pay the dividends
in full on all other classes of Globe‘s outstanding shares that are
scheduled to be paid on or before any Dividend Payment Date and
that have an equal right and priority to dividends as the Shares.
If the unrestricted retained earnings available to distribute as
dividends are, in Globe‘s Board of Directors‘ opinion, not sufficient
to enable Globe to pay both dividends on the Shares and the
dividends on other shares that have an equal right and priority to
dividends as the Shares, in full and on the same date, then Globe
may: first, pay in full, or to set aside an amount equal to, all
dividends scheduled to be paid on or before that dividend payment
date on any shares with a right to dividends ranking higher in
priority to that of the Shares; and second, to pay dividends on the
Shares and any other shares ranking equally with the Shares as to
participation in such retained earnings pro rata to the amount of the
cash dividends scheduled to be paid to them. The amount
scheduled to be paid will include the amount of any dividend
payable on that date and any arrears on any past cumulative
dividends on any shares ranking equal in priority with the Shares to
receive dividends.
The profits available for distribution are, in general and with some
adjustments, equal to Globe‘s accumulated, realized profits less
accumulated, realized losses.
If for any reason Globe‘s Board does not declare a dividend on the
Shares for a dividend period, Globe will not pay a dividend on the
Dividend Payment Date for that dividend period. However, on any
future Dividend Payment Date on which dividends are declared,
holders of the Shares must receive the Dividends due them on
such Dividend Payment Date as well as all Dividends accrued and
unpaid to the holders of the Shares prior to such Dividend Payment
Date (see “Description of the Preferred Shares”). Dividends on the
non-voting preferred shares may be deferred, but dividends on the
Company‘s common shares cannot be paid for as long as there are
deferred dividends that remain unpaid on the non-voting preferred
shares.
Holders of Shares shall not be entitled to participate in any other or
further dividends beyond the dividends specifically payable on the
Shares.
Dividend Payment Dates .....
Dividends will be payable on February 22, and August 22 of
each year (each a ―Dividend Payment Date‖), being the last
day of each 6-month dividend period (a ―Dividend Period‖), as
and if declared by Globe in accordance with the terms and
conditions of the Shares. If the Dividend Payment Date is not a
Banking Day, Dividends will be paid on the next succeeding
Banking Day, without adjustment as to the amount of dividends
to be paid.
Payments on the Shares...... All payments of dividends and any other amounts under the
Shares shall be paid by Globe in Philippine Pesos. On the relevant
payment dates, the Paying Agent shall make available to
Shareholders, checks drawn against the Payment Settlement
Account in the amount due to each Shareholder of record as of the
relevant Record Date, either (i) for pick-up by the Shareholder or
its duly authorized representative at the office of the Paying Agent
27
or (ii) delivery via courier or, if courier service is unavailable for
deliveries to the address of the relevant Shareholder, via mail, at
the Shareholder‘s risk, to the address of the Shareholder
appearing in the Register of Shareholders.
Optional Redemption and
Globe has the option, but not the obligation, to redeem all (but not
Purchase ............................... part) of outstanding Shares (having given not less than thirty (30)
days‘ notice) on:
(a) the Rate Re-Setting Date; or
(b) any Dividend Payment Date after the Rate Re -Setting
Date.
at a redemption price equal to the Issue Price plus any accrued
and unpaid dividends after deduction for any tax and customary
transfer costs to effect the redemption (the ―Redemption
Payment‖). The Redemption Payment shall be made to holders
of the Shares as of the record date set by Globe for such
redemption.
Subject to compliance with law, Globe may purchase the Shares
at any time at any price either through the PSE, by public
tender or through negotiated transactions.
Any Shares redeemed or purchased by Globe shall be
recorded as treasury stock of Globe and may be re-issued in the
future at such terms and at such time as Globe may determine.
Early Redemption Due to
If payments become subject to additional withholding or any
Occurrence of a Tax
new tax as a result of certain changes in law, rule or
Event ...................................... regulation, or in the interpretation thereof, and such tax
cannot be avoided by use of reasonable measures available
to Globe, Globe may redeem the Shares in whole, but not in
part, on any Dividend Payment Date (having given not less
than thirty (30) nor more than sixty (60) days‘ notice) at the Issue
Price plus all accrued and unpaid dividends, if any.
Early Redemption Due to
Changes in Accounting
Treatment of the Shares
If an Accounting Event occurs that will result in a change in
accounting treatment of the Shares, the Issuer may redeem the
Shares in whole, but not in part, on any Dividend Payment Date
(having given not more than 60 nor less than 30 days‘ prior
notice) at the Issue Price plus all accrued and unpaid dividends, if
any.
An Accounting Event shall occur if in the opinion of Globe, with
due consultation with its independent auditors at the relevant time
there is a change in applicable accounting standards that result in
more than an insubstantial risk that either the Shares or the funds
raised through the issuance of the Shares may no longer be
recorded as ―equity‖ to the full extent as at the Issue Date
pursuant to the PFRS, or such other accounting standards, which
succeed PFRS, as adopted by the Philippines, applied by the
Issuer for drawing up its financial statements for the relevant
financial year.
No Sinking Fund ................... Globe has not established, and currently does not intend to
establish, a sinking fund for the redemption of the Shares.
Taxation ................................. All payments in respect of the Shares are to be made free and
clear of any deductions or withholding for or on account of any
present or future taxes or duties imposed by or on behalf of
Republic of the Philippines, including but not limited to,
documentary stamp, issue, registration, value added or any
28
similar tax or other taxes and duties, including interest and
penalties. If such taxes or duties are imposed, Globe will pay
additional amounts so that holders of the Shares will receive
the full amount of the relevant payment which otherwise
would have been due and payable. Provided, however, that
Globe shall not be liable for:
(a) the final withholding tax applicable to dividends earned by
holders of the Shares as prescribed under the National
Internal Revenue Code of 1997, as amended, and relevant
regulations;
(b) expanded value added tax which may be payable by any
holder of the Shares on any amount to be received from
Globe u nder th e term s and condition s of the Sh ares ;
and
(c) Any withholding tax on any amount payable to any
holder of Shares or any entity which is a non-resident
foreign corporation.
Any documentary stamp tax for the recording of the Shares in
the name of an investor under the Offer shall paid for by
Globe. After the Listing Date, taxes generally applicable to a
subsequent sale of the Shares by any holder of the Shares,
including receipt by such holders of a Redemption Payment,
shall be for the account of the said holder.
See the discussion under ―Taxation.‖
Liquidation Rights ................ In the event of a return of capital in respect of Globe‘s winding up
or otherwise (whether voluntarily or involuntarily) (but not on a
redemption or purchase by Globe of any of its share capital), the
holders of the Shares at the time outstanding will be entitled to
receive, in Pesos out of Globe‘s assets available for distribution to
shareholders, together with the holders of Globe‘s Voting
Preferred Shares and holders of any other shares of Globe
ranking, as regards repayment of capital, pari passu with the
Shares and before any distribution of assets is made to holders of
any class of Globe‘s shares ranking junior to the Shares as
regards repayment of capital, liquidating distributions in an
amount of P500.00 per Share plus an amount equal to any
dividends declared but unpaid in respect of the previous dividend
period and any accrued and unpaid dividends for the then-current
dividend period to (and including) the date of commencement of
Globe‘s winding up or the date of any such other return of capital,
as the case may be. If, upon any return of capital in Globe‘s
winding up, the amount payable with respect to the Shares and
Globe‘s Voting Preferred Shares and any other shares of Globe
ranking, pari passu as to any such distribution with the Shares,
are not paid in full, the holders of the Shares and of such other
shares will share rateably in any such distribution of Globe‘s
assets in proportion to the full respective preferential amounts to
which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of
the Shares will have no right or claim to any of Globe‘s remaining
assets and will not be entitled to any further participation or return
of capital in a winding up.
Form, Title and
The Shares are recorded in scripless form through the
Registration of the Shares... electronic book-entry system of PDTC as Registrar for the Offer,
and will be lodged with PDTC as Depository Agent on Listing
Date through PSE Trading Participants nominated by the
29
a c c e p t e d Applicants. F o r t h i s p u r p o s e , Applicants shall
indicate in the proper space provided for in the Application
Form the name of the PSE Trading Participant under whose
name their Shares will be registered.
After Listing Date, Shareholders may request the Registrar,
through their nominated PSE Trading Participant, to (a) open
a scripless registry account and have their holdings of the
Shares registered under their name (―name-on-registry
account‖), or (b) issue stock certificates evidencing their
investment in the Preferred Shares. Any expense that will be
incurred in relation to such registration or issuance shall be for
the account of the requesting Shareholder.
Legal title to the Shares will be shown in an electronic
register of shareholders (the ―Registry of Shareholders‖)
which shall be maintained by the Registrar. The Registrar
shall send a transaction confirmation advice confirming every
receipt or transfer of the Shares that is effected in the Registry
of Shareholders (at the cost of the requesting Shareholder). The
Registrar shall send (at the cost of Globe) at least once every
quarter a Statement of Account to all Shareholders named in
the Registry of Shareholders, except certificated Shareholders
and Depository Participants, confirming the number of Shares
held by each Shareholder on record in the Registry of
Shareholders. Such Statement of Account shall serve as
evidence of ownership of the relevant Shareholder as of a given
date thereof. Any request by Shareholders for certifications,
reports or other documents from the Registrar, except as
provided herein, shall be for the account of the requesting
Shareholder.
Status of the Shares in
the Distribution of Assets
in the Event of
Dissolution ............................
The Shares will constitute the direct and unsecured
subordinated obligations of Globe ranking at least pari passu in
all respects and rateably without preference or priority
among themselves with all other preferred shares issued by
Globe.
Selling and Transfer
Initial placement of the Shares and subsequent transfers of
Restrictions ........................... interests in the Shares shall be subject to normal selling
restrictions for listed securities as may prevail in the Philippines
from time to time.
Title and Transfer ................. Legal title to the Shares shall pass by endorsement and
delivery to the transferee and registration in the Registry of
Shareholders to be maintained by the Registrar. Settlement of
the Shares in respect of such transfer or change of title to the
Preferred Shares, including the settlement of documentary
stamp taxes, if any, arising from subsequent transfers, shall
be similar to the transfer of title and settlement procedures for
listed securities in the PSE.
Governing Law ..................... The Shares will be issued pursuant to, and terms and
conditions of the Shares will be governed by, the laws of the
Republic of the Philippines.
Offer Period ........................... The Offer Period shall commence at 9:00 a.m. on August 11,
2014 and end at 5:00 p.m. on August 15, 2014. Globe and the
Underwriters reserve the right to extend or terminate the Offer
30
Period with the approval of the SEC and the PSE.
Minimum Subscription to
Each Application shall be for a minimum of one hundred (100)
the Shares ............................. Shares, and thereafter, in multiples of ten (10) Shares. No
Application for multiples of any other number of Shares will
be considered.
Eligible Investors .................. The Shares may be owned or subscribed to by any person,
partnership, association or corporation regardless of nationality,
provided that at any time, at least 60% of the outstanding capital
stock of Globe shall be owned by citizens of the Philippines
or by partnerships, associations or corporations at least 60% of
whose voting stock or voting power is owned and controlled by
citizens of the Philippines. In addition, under certain
circumstances Globe may reject an Application or reduce the
number of Shares applied for subscription or purchase.
Law may restrict subscription to the Shares in certain
jurisdictions. Foreign investors interested in subscribing to or
purchasing the Shares should inform themselves of the
applicable legal requirements under the laws and regulations of
the countries of their nationality, residence or domicile, and as
to any relevant tax or foreign exchange control laws and
regulations affecting them personally. Foreign investors, both
corporate and individual, warrant that their purchase of the
Shares will not violate the laws of their jurisdiction and that
they are allowed to acquire, purchase and hold the Shares.
Application Procedure ......... Application Forms may be obtained from an Underwriter or
Selling Agent. All applications shall be evidenced by the
Application Form, duly executed in each case by an authorized
signatory of the applicant and accompanied by two (2)
completed signature cards, the corresponding payment for the
Shares covered by the application and all other required
documents including documents required for registry with the
Registrar and Depository Agent. The duly executed Application
Form and required documents should be submitted to the
Underwriters or Selling Agents on or prior to the set deadline for
submission of Applications for Underwriters and Selling Agents,
respectively (see ―Schedule of Offer‖ below). If the Applicant is a
corporation, partnership, or trust account, the application must be
accompanied by the required documents indicated on the
Application Form.
Payment for the Shares ....... The Shares must be paid for in full upon submission of the
Application Form.
Acceptance/Rejection of
The actual number of Shares that an Applicant will be
Applications .......................... allowed to subscribe to is subject to the confirmation of the
Underwriters. Globe reserves the right to accept or reject, in
whole or in part, or to reduce any Application due to any
grounds specified
in
the
Issue
Management
and
Underwriting Agreement entered into by Globe, the Issue
Manager and Underwriters. Applications which were unpaid or
where payments were insufficient and those that do not
comply with the terms of the Offer shall be rejected.
Moreover, any payment received pursuant to the Application
does not ensure or indicate approval or acceptance by Globe of
the Application.
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An Application, when accepted, shall constitute an agreement
between the Applicant and Globe for the subscription to the
Shares at the time, in the manner and subject to terms and
conditions set forth in the Application Form and those described
in this Prospectus. Notwithstanding the acceptance of any
Application by Globe, the actual subscription by the Applicant for
the Shares will become effective only upon listing of the
Shares on the PSE and upon the obligations of the
Underwriters under the Issue Management and Underwriting
Agreement becoming unconditional and not being suspended,
terminated or cancelled, on or before the Listing Date, in
accordance with the provision of the said agreements. If such
conditions have not been fulfilled on or before the periods
provided above, all Application payments will be returned to the
Applicants without interest.
Refunds of Application
In the event that the number of Shares to be allotted to an
Payments .............................. Applicant, as confirmed by an Underwriter, is less than the
number covered by its Application, or if an Application is
wholly or partially rejected by Globe, then Globe shall refund,
without interest, within five (5) Banking Days from the end
of the Offer Period, all, or a portion of the payment
corresponding to the number of Shares wholly or partially
rejected. All refunds shall be made through the Underwriter or
Selling Agent with whom the Applicant has filed the Application.
Registration of Foreign
The Bangko Sentral ng Pilipinas (―BSP‖) requires that
Investments .......................... investments in shares of stock funded by inward remittance of
foreign currency be registered with the BSP if the foreign
exchange needed to service capital repatriation or dividend
remittance will be sourced from the domestic banking system.
The registration with the BSP of all foreign investments in the
S hares shall be the responsibility of the foreign investor (see
―Philippine Foreign Investment, Foreign Ownership and
Exchange Controls‖).
Indicative Issue Date ............ The Shares are expected to be recorded in the name of
accepted applicants and listed on the PSE on August 22,
2014. Trading of the Shares will commence on the same date.
Receiving Agent ................... Bank of the Philippine Islands—Stock Transfer Office
Registrar ............................... Philippine Depository and Trust Corporation
Paying Agent ....................... Bank of the Philippine Islands—Stock Transfer Office
Schedule of the Offer ........... The Offer is indicatively scheduled to proceed as follows:
Start of Offer Period .................................
9:00 am of August 11, 2014
Deadlines for Submission of Applications are as follows:
Delivered through Selling Agents ............
12:00 nn of August 15, 2014
Delivered through Underwriters ...............
5:00 pm of August 15, 2014
Applications received after these deadlines or without the required
documents and/or full payments will be rejected. Applications shall
be considered irrevocable upon submission to any Selling Agent
or Underwriter, and shall be subject to the terms and conditions of
the offer as stated in this Prospectus and in the application to
subscribe and purchase form.
32
Indicative Listing Date ........ August 22, 2014
33
DESCRIPTION OF THE SECURITIES
The following are general information relating to the Company‟s capital stock and does not purport to be a
complete listing of all the features, rights, obligations, or privileges of the Series A Perpetual Preferred
Shares, and is qualified in its entirety by reference to applicable provisions of the Company‟s amended
articles of incorporation and amended by-laws, as well as the Deed Poll and the Stock Transfer, Receiving
and Paying Agency Agreement. Some rights, obligations, or privileges may be further limited or restricted by
other documents.
GLOBE’S SHARE CAPITAL
A Philippine corporation may issue common or preferred shares, or such other classes of shares with
such rights, privileges or restrictions as may be provided for in the articles of incorporation and the bylaws of the corporation.
On February 10, 2014, the Board of Directors approved the amendment of the Company‘s Art icles of
Incorporation to reclassify thirty one (31,000,000) million unissued common shares with par value of
P50.00 per share and ninety (90,000,000) million unissued voting preferred shares with par value of
P5.00 per share into a new class of forty (40,000,000) million non-voting preferred shares with par
value of P50.00 per share. The non-voting preferred shares shall be redeemable, non-convertible, nonvoting, cumulative and may be issued in series.
Further on April 7, 2014, the Board of Directors approved the issuance, offer and listing of up to twenty
(20,000,000) million non-voting preferred shares, with an issue volume of up to ten
(P10,000,000,000.00) billion pesos.
On June 5, 2014, the Securities and Exchange Commission approved the amendment of the Seventh
Article of the Company‘s Articles of Incorporation to implement the foregoing reclassification of shares.
At the Stockholders‘ meeting held on April 8, 2014, the Stockholders representing at least two thirds of
the outstanding capital stock, considered and approved the (i) amendment to the Seventh Article of the
Articles of Incorporation, and (ii) the issuance, offering and listing of up to twenty (20,000,000) million
non-voting preferred shares.
Following the Offer, and assuming the Oversubscription Option is exercised in full, the Company will have (a)
132,680,427 of 148,934,373 authorized common shares, (b) 20,000,000 of 40,000,000 authorized NonVoting Preferred Shares, and (d) 158,515,021 of 160,000,000 authorized Voting Preferred Shares, issued
and outstanding. The holders of the Preferred Shares do not have identical rights and privileges with holders
of the existing common shares of the Company.
THE PREFERRED SHARES
General Features
Under the Articles and as approved by the Board of Globe, the Non-Voting Preferred Shares have the
following features, rights and privileges:




The issue value of the Non-Voting Preferred Shares will be determined by the Board of Directors at
the time of issuance;
The dividend yield of the Non-Voting Preferred Shares will be determined by the Board of Directors
at the time of issuance;
Unless otherwise specified by the Board of Directors at the time of issuance, dividends shall be
deemed cumulative from the date of issue.
In the event of liquidation, the Non-Voting Preferred Shares shall rank ahead of the Common Shares
and equally with the Voting Preferred Shares. The Board of Directors shall prescribe the amount
which shares of such series shall be entitled to receive in the event of any liquidation, dissolution or
winding up of the Corporation, which shall not exceed the consideration received therefore plus
accrued and unpaid dividends thereon nor be less than the par value thereof.
34





The Non-Voting Preferred Shares shall not participate in dividends declared as regards any other
class of Shares.;
The Non-Voting Preferred Shares have no voting rights, except on all corporate matters where the
law grants such voting right;
The Non-Voting Preferred Shares shall have no pre-emptive rights over any sale or issuance of any
share in the Company‘s capital stock;
The Non-Voting Preferred Shares shall be redeemable at the option of the Corporation at such times
and price(s) as may be determined by the Board of Directors at the time of issue, which price may
not be less than the par value thereof plus accrued dividends. Any shares redeemed or purchased
by the Corporation shall be recorded as treasury stock and may be re-issued in the future. The
Board of Directors shall determine the terms and conditions of a retirement or sinking fund, if any, for
the purchase or redemption of the shares of such series; and
As determined by the Board of Directors of Globe, dividends on the non-voting preferred shares may
be deferred, but dividends on the Company‘s common shares cannot be paid for as long as there
are deferred dividends that remain unpaid on the non-voting preferred shares.
The holders of the Preferred Shares do not have identical rights and privileges with holders of the
existing common shares of the Company.
Features Specific or Particular to the Preferred Shares
Following are certain features specific or particular to the Preferred Shares.
In General: No Voting Rights
Under the Articles, the holders of the Preferred Shares shall have no voting rights except as
specifically provided by law. Thus, holders of the Preferred Shares shall not be eligible, for example, to
vote for or elect the Company‘s Directors or to vote for or against the issuance of a stock dividend.
Holders of Preferred Shares, however, may vote on matters which the Corporation Code considers
significant corporate acts that may be implemented only with the approval of shareholders, including
those holding shares denominated as non-voting in the articles of incorporation. These acts, which
require the approval of shareholders representing at least two-thirds of the issued and outstanding
capital stock of the Company in a meeting duly called for the purpose, are as follows:








Amendment of the Articles (including any increase or decrease in capital stock);
Amendment of the Company‘s By-laws;
Sale, lease, exchange, mortgage, pledge or other disposition of all or a substantial part of
the Company‘s assets;
Incurring, creating or increasing bonded indebtedness;
Increase or decrease of capital stock;
Merger or consolidation of the Company with another corporation or other corporations;
Investment of corporate funds in any other corporation or business or for any purpose other
than the primary purpose for which the Company was organized; and
Dissolution of the Company.
Dividend Policy In Respect of the Preferred Shares
The declaration and payment of dividends on each Dividend Payment Date will be subject to the sole
and absolute discretion of the Board to the extent permitted by law.
As and if declared by the Board, dividends on the Shares shall be at a fixed rate of 5.2006% per annum
calculated in respect of each Share by reference to the Offer Price thereof (the Dividend Rate).
Unless the Preferred Shares are redeemed by the Company on the Rate Re-Setting Date, the
Dividend Rate for all following Dividend Periods shall be the higher of (a) the prevailing Dividend Rate
on such Rate Re-Setting Date or (b) the sum of (i) the Reference Rate applicable for the Rate ReSetting Date, and (ii) the Step-Up Spread.
35
As and if declared by the Board, the dividends on the Shares will be calculated on a 30/360 day basis and
will be paid semi-annually in arrears on a Dividend Payment Date, which is the last day of each 6-month
Dividend Period. Subject to limitations described in this Prospectus, dividends on the Shares will be payable
on February 22 and August 22 of each year (each a Dividend Payment Date).
If the Dividend Payment Date is not a Banking Day, Dividends will be paid on the next succeeding
Banking Day, without adjustment as to the amount of dividends to be paid.
The Board will not declare and pay dividends on any Dividend Payment Date where (a) payment of
the Dividend would cause the Issuer to breach any of its financial covenants or (b) the profits available
to the Issuer to distribute as dividends are not sufficient to enable the Issuer to pay in full both the
dividends on the Preferred Shares and the dividends on all other classes of the Issuer‘s shares that
are scheduled to be paid on or before the same date as the Dividends on the Preferred Shares and
that have an equal right to dividends as the Preferred Shares.
If the profits available to distribute as dividends are, in the Board‘s opinion, not sufficient to enable the
Issuer to pay in full on the same date both dividends on the Preferred Shares and the dividends on
other shares that have an equal right to dividends as the Preferred Shares, the Issuer is required first,
to pay in full, or to set aside an amount equal to, all dividends scheduled to be paid on or before that
dividend payment date on any shares with a right to dividends ranking in priority to that of the
Preferred Shares; and second, to pay dividends on the Preferred Shares and any other shares
ranking equally with the Preferred Shares as to participation in profits pro rata to the amount of the
cash dividends scheduled to be paid to them. The amount scheduled to be paid will include the
amount of any dividend payable on that date and any arrears on past cumulative dividends on any
shares ranking equal in the right to dividends with the Preferred Shares.
The profits available for distribution are, in general and with some adjustments, equal to the Issuer‘s
accumulated, realized profits less accumulated, realized loss. In general, under Philippine law, a
corporation can only declare dividends to the extent that it has unrestricted retained earnings.
Unrestricted retained earnings represent the undistributed earnings of the corporation which have not
been allocated for any managerial, contractual or legal purposes and which are free for distribution to
the shareholders as dividends.
Dividends on the Preferred Shares will be cumulative. If for any reason the Issuer‘s Board does not
declare a dividend on the Shares for a dividend period, the Issuer will not pay a dividend on the
Dividend Payment Date for that dividend period. However, on any future Dividend Payment Date on
which dividends are declared, holders of the Shares must receive the Dividends due them on such
Dividend Payment Date as well as all Dividends accrued and unpaid to the holders of the Shares prior
to such Dividend Payment Date.
Holders of Preferred Shares shall not be entitled to participate in any other or further dividends
beyond the dividends specifically payable on the Preferred Shares.
Redemption of the Preferred Shares
As and if declared by the Board, the Issuer may redeem the Preferred Shares on the Rate Re-Setting
Date or on any Dividend Payment Date thereafter in whole (but not in part only), at a redemption price
equal to the Issue Price plus any accrued and unpaid dividends after deduction for any tax and customary
transfer costs, to effect the redemption (the ―Redemption Payment‖). Administrative costs and out of pocket
expenses, which includes the cost of checks used, supplies, paying agency services, messengerial services
and mailing fees in relation to the Redemption Payment shall be for the account of Globe. The Redemption
Payment shall be made to holders of the Shares as of the record date set by Globe for such redemption.
The Issuer has not established, and currently has no plans to establish, a sinking fund for the
redemption of the Preferred Shares.
36
The Issuer may purchase the Shares at any time in the open market or by public tender or by private
contract at any price through the PSE. The Shares so purchased shall be recorded as treasury
stock and may be re-issued in the future.
The Issuer shall give not less than thirty (30) or more than sixty (60) days prior written notice of its
intention to redeem the Preferred Shares, which notice shall be irrevocable and binding upon the Issuer
to effect such early redemption of the Preferred Shares at the Redemption Date stated in such notice.
Early Redemption Due to Taxation
If payments become subject to additional withholding or any new tax as a result of certain changes in
law, rule or regulation, or in the interpretation thereof, and such tax cannot be avoided by use of
reasonable measures available to the Issuer, the Issuer may redeem the Preferred Shares in whole,
but not in part, on any Dividend Payment Date (having given not more than 60 nor less than 30 days‘
notice) at the Issue Price plus all accrued and unpaid dividends, if any.
Documentary stamp tax for the primary issue of the Preferred Shares and the documentation, if any,
shall be for the Issuer‘s account.
Early Redemption Due to Changes in Accounting Treatment of the Shares
If an Accounting Event occurs that will result in a change in accounting treatment of the Shares, the
Issuer may redeem the Shares in whole, but not in part, on any Dividend Payment Date (having given
not more than 60 nor less than 30 days‘ prior notice) at the Issue Price plus all accrued and unpaid
dividends, if any.
An Accounting Event shall occur if in the opinion of Globe, with due consultation with its independent
auditors, at the relevant time there is a change in applicable accounting standards that result in more
than an insubstantial risk that either the Shares or the funds raised through the issuance of the Shares
may no longer be recorded as ―equity‖ to the full extent as at the Issue Date pursuant to the PFRS, or
such other accounting standards, which succeed PFRS, as adopted by the Philippines, applied by the
Issuer for drawing up its financial statements for the relevant financial year.
Liquidation Rights In Respect of the Preferred Shares
The Preferred Shares will constitute direct and unsecured subordinated obligations of the Issuer
ranking at least pari passu in all respects and rateably without preference or priority among
themselves with all other preferred shares issued by the Issuer.
In the event of a return of capital in respect of the Issuer‘s winding up or otherwise (whether
voluntarily or involuntarily) (but not on a redemption or purchase by the Issuer of any of its share
capital), the holders of the Preferred Shares at the time outstanding will be entitled to receive, in
Pesos out of the Issuer‘s assets available for distribution to shareholders, together with the holders of
any other of the Issuer‘s shares ranking, as regards repayment of capital, pari passu with the
Preferred Shares and before any distribution of assets is made to holders of any class of the Issuer‘s
shares ranking after the Preferred Shares as regards repayment of capital, liquidating distributions in
an amount of P500.00 per Preferred Share plus an amount equal to any dividends declared but
unpaid in respect of the previous dividend period and any accrued and unpaid dividends for the then
current dividend period to (and including) the date of commencement of the Issuer‘s winding up or the
date of any such other return of capital, as the case may be. If, upon any return of capital in the
Issuer‘s winding up, the amount payable with respect to the Preferred Shares and any other of the
Issuer‘s shares ranking as to any such distribution pari passu with the Preferred Shares are not paid in
full, the holders of the Preferred Shares and of such other shares will share rateably in any such
distribution of the Issuer‘s assets in proportion to the full respective preferential amounts to which they
are entitled. After payment of the full amount of the liquidating distribution to which they are entitled,
the holders of the Preferred Shares will have no right or claim to any of the Issuer‘s remaining assets
and will not be entitled to any further participation or return of capital in a winding up.
37
Payments of the Preferred Shares
All payments in respect of the Preferred Shares are to be made free and clear of any deductions or
withholding for or on account of any present or future taxes or duties imposed by or on behalf of
Republic of the Philippines, including but not limited to, stamp, issue, registration, documentary, value
added or any similar tax or other taxes and duties, including interest and penalties. If such taxes or
duties are imposed, the Issuer will pay additional amounts so that holders of the Preferred Shares will
receive the full amount of the relevant payment which otherwise would have been due and payable.
Provided, however, that the Issuer shall not be liable for: (a) the final withholding tax applicable on
dividends earned on the Preferred Shares prescribed under the National Internal Revenue Code of
1997, (b) expanded value added tax which may be payable by any holder of the Preferred Shares on
any amount to be received from the Issuer under the Preferred Shares and (c) any withholding tax on
any amount payable to any holder of the Share or any entity which is a non-resident foreign
corporation.
Documentary stamp tax for the primary issue of the Shares and the documentation, if any, shall be for
the account of the Issuer.
The standard taxes applicable to the subsequent sale of the Preferred Shares by any holder of the
Preferred Shares shall be for the account of the said holder.
No Pre-emptive Rights
The Articles currently deny pre-emptive rights to holders of Preferred Shares over all issuances of the
Company‘s common, Non-Voting Preferred Shares and Voting Preferred Shares. However, shareholders
representing at least two-thirds of the Company‘s issued and outstanding capital stock voting at a
shareholders‘ meeting duly called for the purpose may amend the Articles to grant pre-emptive rights
to subscribe to a particular issue or other disposition of shares from Globe‘s capital. Pre-emptive rights
may not extend to shares to be issued in compliance with laws requiring stock offerings or minimum
stock ownership by the public; or to shares to be issued in good faith with the approval of the
shareholders representing two-thirds of the outstanding capital stock in exchange for property needed
for corporate purposes or in payment of a previously contracted debt.
Transfer of Shares and Share Register
The Preferred Shares will be issued in scripless form.
Legal title to the Preferred Shares will be shown in the Register of Shareholders which shall be
maintained by the Registrar. The Registrar shall send (at the cost of the Issuer) at least once every
quarter a Statement of Account to all Shareholders named in the Register of Shareholders confirming
the number of Shares held by each Shareholder on record in the Register of Shareholders. Such
Statement of Account shall serve as evidence of ownership of the relevant Shareholder as of a given
date thereof. Any request by Shareholders for certifications, reports or other documents from the
Registrar, except as provided herein, shall be for the account of the requesting Shareholder.
Initial placement of the Preferred Shares and subsequent transfers of interests in the Preferred
Shares shall be subject to normal Philippine selling restrictions for listed securities as may prevail
from time to time.
After Issue Date, Shareholders of the Shares may request the Registrar and Depository Agent to
issue stock certificates evidencing their investment in the Preferred Shares. Any expense that will be
incurred in relation to such issuance shall be for the account of the requesting shareholder.
Philippine law does not require transfers of the Preferred Shares to be effected on the PSE, but any
off-exchange transfers will subject the transferor to a capital gains tax that may be significantly greater
than the stock transfer tax applicable to transfers effected on an exchange. See ―Taxation‖. All
transfers of shares on the PSE must be effected through a licensed stock broker in the Philippines.
38
Not Convertible into Common Shares
The Preferred Shares shall not be convertible into Globe‘s common shares.
Other Rights and Incidents Relating to the Preferred Shares
Following are other rights and incidents relating to the Preferred Shares, which may also apply to
other classes of Globe‘s stock.
Restrictions on Foreign Ownership of Globe’s Shares by Non-Philippine Nationals
Under Philippine law, no franchise, certificate, or any other form of authorization for the operation of
public utility shall be granted except to citizen of the Philippines or to corporations or associations
organized under the laws of the Philippines at least 60% of whose capital is owned by such citizens.
Accordingly, the Preferred Shares and Globe‘s other shares may be owned or subscribed by or
transferred to any person, partnership, association or corporation regardless of nationality, provided
that at any time at least 60% of the Company‘s outstanding capital stock shall be owned by citizens
of the Philippines or by partnerships, associations or corporations 60% of the voting stock or voting
power of which is owned and controlled by citizens of the Philippines.
Directors
Unless otherwise provided by law or the Articles, the Company‘s corporate powers are exercised, its
business is conducted, and its property is controlled by the Board. Globe has eleven Directors who are
elected by holders of shares entitled to voting rights under the Articles during each annual meeting of
the shareholders for a term of one year. As mentioned, holders of Preferred Shares are not entitled to
vote for and elect the Company‘s Directors.
Globe‘s By-laws currently disqualify or deem ineligible for nomination or election to the Board any
person who is engaged in any business which competes with or is antagonistic to that of the
Company. Without limiting the generality of the foregoing, a person shall be deemed so engaged:
If he is an officer, manager or controlling person of, or the owner (either of record or beneficially)
of 10% or more of any outstanding class of shares of, any corporation (other than one in which
the Company owns at least 30% of the capital stock) engaged in a business which the Board, by
at least three-fourths vote, determines to be competitive or antagonistic to that of the Company;
b. If he is an officer, manager, controlling person of, or the owner (either of record or beneficially of
10% or more of any outstanding class of shares of any other corporation or entity engaged in any
line of business of the Company, when in the judgment of the Board, by at least three-fourths
vote, the laws against combinations in restraint of trade shall be violated by such person‘s
membership in the Board; and
c. If the Board, in the exercise of its judgment in good faith, determines by at least three-fourths vote
that he is the nominee of any person set forth in (a) or (b).
a.
In determining whether or not a person is a controlling person, beneficial owner, or the nominee of
another, the Board may take into account such factors as business and family relations.
The Company conforms to the requirement to have at least one independent director or such number
of independent directors as may be required by law. As of the date of this Prospectus, the Company‘s
independent directors are Manuel A. Pacis, Guillermo D. Luchangco and Rex Ma. A. Mendoza.
Directors may only act collectively; individual Directors have no power as such. A majority of the
Directors constitutes a quorum for the transaction of corporate business and every decision of a
majority of the quorum duly assembled as a board is valid as a corporate act. Any vacancy created by
the death or resignation of a Director prior to expiration of his term may be filled by the remaining
members of the Board, if still constituting a quorum. Any Director elected in this manner by the Board
shall serve only for the unexpired term of the Director whom he replaces. Any such vacancy may also
be filled by the shareholders entitled to vote, by ballot, at any meeting or adjourned meeting held
during such vacancy, provided that the notice of the meeting mentions such vacancy or expected
39
vacancy.
Appraisal Rights
Philippine law recognizes the right of a shareholder to institute, under certain circumstances,
proceedings on behalf of the corporation in a derivative action in circumstances where the corporation
itself is unable or unwilling to institute the necessary proceedings to redress wrongs committed
against the corporation or to vindicate corporate rights, as for example, where the directors
themselves are the malefactors.
In addition, the Corporation Code grants a shareholder a right of appraisal in certain circumstances
where he has dissented and voted against a proposed corporate action, including:




an amendment of the articles of incorporation which has the effect of adversely affecting the rights
attached to his shares or of authorizing preferences in any respect superior to those of
outstanding shares of any class or of extending or shortening the term of corporate existence;
the sale, lease, exchange, transfer, mortgage, pledge or other disposal of all or substantially
all the assets of the corporation;
the investment of corporate funds in another corporation or business or for any purpose
other than the primary purpose for which the corporation was organized; and
A merger or consolidation.
In these circumstances, the dissenting shareholder may require the corporation to purchase his
shares at a fair value which, in default of agreement, is determined by three disinterested persons,
one of whom shall be named by the stockholder, one by the corporation, and the third by the two thus
chosen. The SEC will, in the event of a dispute, determine any question about whether a dissenting
shareholder is entitled to this right of appraisal. The dissenting stockholder will be paid if the corporate
action in question is implemented and the corporation has unrestricted retained earnings sufficient to
support the purchase of the shares of the dissenting shareholders.
Shareholders’ Meeting
At the annual meeting or at any special meeting of the Company‘s shareholders, the latter may be
asked to approve actions requiring shareholder approval under Philippine law.
Quorum
The Corporation Code provides that, except in instances where the assent of shareholders
representing two-thirds of the outstanding capital stock is required to approve a corporate act (usually
involving the significant corporate acts where even non-voting shares may vote, as identified above)
or where the by-laws provide otherwise, a quorum for a meeting of shareholders will exist if
shareholders representing a majority of the capital stock are present in person or by proxy.
Voting
At every meeting of the stockholders of the Company, every stockholder entitled to vote shall be entitled to
one vote for each share of stock standing in his name on the books of the Company; provided, however,
that in the case of the election of directors every stockholder entitled to vote shall be entitled to accumulate
his votes in accordance with the provision of law in such case made and provided. Every stockholder
entitled to vote at any meeting of the stockholders may so vote by proxy, provided that the proxy shall have
been appointed in writing by the stockholder himself, or by his duly authorized attorney; in accordance with
the existing laws, and rules and regulations of the Securities & Exchange Commission x x x‖
In case of election of directors, each stockholder may vote such number of shares for as many persons as
there are directors to be elected or he may cumulate said shares and give one nominee as many votes as
the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute
them on the same principle among as many nominees as he shall see fit, provided that the whole number of
votes cast by him shall not exceed the number of shares owned by him multiplied by the whole number of
directors to be elected.
40
Fixing Record Dates
The Board has the authority to fix in advance the record date for shareholders entitled: (a) to notice of,
to vote at, or to have their votes voted at, any shareholders‘ meeting; (b) to receive payment of
dividends or other distributions or allotment of any rights; or (c) for any lawful action or for making any
other proper determination of shareholders‘ rights. No transfer will be recorded in the stock and
transfer book on the date of a shareholders‘ meeting and within five working days from the record
date of such meeting.
Issues of Shares
Subject to applicable limitations, the Company may issue additional shares to any person for
consideration deemed fair by the Board, provided that such consideration shall not be less than the
par value of the issued shares.
Mandatory Tender Offers
Under the Securities Regulation Code and its implementing rules, subject to certain exceptions:
A.
Any person or group of persons acting in concert, who intends to acquire thirty five percent
(35%) or more of equity shares in a public company shall disclose such intention and
contemporaneously make a tender offer for the percent sought to all holders of such class.
In the event that the tender offer is oversubscribed, the aggregate amount of securities to be
acquired at the close of such tender offer shall be proportionately distributed across both
selling shareholder with whom the acquirer may have been in private negotiations and minority
shareholders.
B.
Any person or group of persons acting in concert, who intends to acquire thirty five percent
(35%) or more of equity shares in a public company in one or more transactions within a
period of twelve (12) months, shall be required to make a tender offer to all holders of
such class for the number of shares so acquired within the said period.
C.
If any acquisition of even less than thirty five percent (35%) would result in ownership of over
fifty one percent (51%) of the total outstanding equity securities of a public company, the
acquirer shall be required to make a tender offer for all the outstanding equity securities to
all remaining stockholders of the said company at a price supported by a fairness opinion
provided by an independent financial advisor or equivalent third party. The acquirer in such a
tender offer shall be required to accept any and all securities thus tendered.
Accounting and Auditing Requirements / Rights of Inspection
Philippine stock corporations are required to file copies of their annual financial statements with the
SEC. Corporations whose shares are listed on the PSE are also required to file quarterly and annual
reports with the SEC and the PSE. Shareholders are entitled to request copies of the most recent
financial statements of the corporation which include a balance sheet as of the end of the most recent
tax year and a profit and loss statement for that year. Shareholders are also entitled to inspect and
examine the books and records that the corporation is required by law to maintain.
The Board is required to present to shareholders at every annual meeting a financial report of the
operations of the corporation for the preceding year. This report is required to include audited financial
statements
Notice to the Preferred Shareholders
Notices to the Preferred Shareholders shall be sent to their mailing address, as appearing in the Registry
of Shareholders, by the Registrar when required to be made through registered mail, surface mail or
personal delivery. Except where a specific mode or notification is provided for herein, notices to
Shareholders shall be sufficient when made in writing and transmitted in any one of the following modes:
41
(i) registered mail; (ii) surface mail; (iii) by one-time publication in a newspaper of general circulation in
the Philippines; (iv) personal delivery to the address on record in the Registry of Shareholders or (v)
disclosure through the Online Disclosure System of the Philippine Dealing & Exchange Corp. (―PDEX‖)
or the Philippine Stock Exchange (―PSE‖). The Registrar shall rely on the Registry of Shareholders in
determining the Shareholders entitled to the notice. All notices shall be deemed to have been received (i)
ten (10) days from posting if transmitted by registered mail; (ii) fifteen (15) days from mailing, if
transmitted by surface mail; (iii) on date of publication; (iv) on date of delivery, by personal delivery; or (v)
on the date that the disclosure is uploaded on the website of the PDEx or the PSE.
The publication in a newspaper of general circulation in the Philippines of a press release or news item
about a communication or disclosure made by Globe to the SEC, the PDEx or the PSE on a matter
relating to the Preferred Shares shall be deemed a notice to the Shareholders of said matter on the date
of the first publication.
42
RISK FACTORS
The price of securities can and does fluctuate, and any individual security may experience upward or
downward movements, and may even become valueless. An investment in the Preferred Shares involves a
higher degree of risk compared to debt instruments. There is an inherent risk that losses may be incurred
rather than profit made as a result of buying and selling securities. Past performance is not a guide to
future performance and there may be a large difference between the price and selling price of these
securities. Investors deal with a range of investments, each of which may carry different levels of risk.
Investors should carefully consider all the information contained in this Prospectus, including the risk factors
described below before deciding to invest in the Preferred Shares.
PRUDENCE REQUIRED
The risk disclosure does not purport to disclose all the risks and other significant aspects of investing in
these securities. An investor should undertake its, his or her own research and study on the trading of
securities before commencing any trading activity. Investors may request information on the
securities and Issuer thereof from the SEC which are available to the public.
PROFESSIONAL ADVICE
An investor should seek professional advice if he or she is uncertain of, or has not understood, any
aspect of the securities to invest in or the nature of risks involved in trading of securities especially
high risk securities.
RISK FACTORS
An investment in the Preferred Shares described in this Prospectus involves a certain degree of risk. A
prospective purchaser of the Preferred Shares should carefully consider the following factors, in
addition to the other information contained in this Prospectus, in deciding whether or not to invest in
the Preferred Shares. This Prospectus contains forward-looking statements that involve risks and
uncertainties. Globe adopts what it considers conservative financial and operational controls and
policies to manage its business risks. Globe‟s actual results may differ significantly from the results
discussed in the forward-looking statements. See section “Forward- Looking Statements” of this
Prospectus. Factors that might cause such differences, thereby making the offering speculative or
risky, may be summarized into those that pertain to the business and operations of Globe, in
particular, and those that pertain to the over-all political, economic, and business environment, in
general. These risk factors and the manner by which these risks shall be managed are presented
below.
Investors should carefully consider all the information contained in this Prospectus including the risk
factors described below, before deciding to invest in the Preferred Shares. The Company's business,
financial condition and results of operations could be materially adversely affected by any of these risk
factors.
Risks Associated to the Industry and Operational Risks
Highly regulated environment
The Globe Group 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
43
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.
On October 10, 2011, the NTC issued Memorandum Circular No. 2-10-2011 titled Interconnection Charge for
Short Messaging Service requiring all public telecommunication entities to reduce their interconnection
charge to each other from P0.35 to P0.15 per text, which Globe complied with as early as November 2011.
On December 11, 2011, the NTC One Stop Public Assistance Center (OSPAC) filed a complaint against
Globe, Smart and Digitel alleging violation of the said MC No. 02-10-2011 and mandating a reduction in the
SMS off-net retail price from P1.00 to P0.80 per text. Globe filed its Answer maintaining the position that the
circular did not require a reduction in the retail rate, only the interconnection charge; that SMS is a value
added service (VAS) which, under the NTC's own circular issued in 2008, is deregulated; and that a
reduction of the SMS interconnection charge does not automatically translate to a reduction in the SMS retail
charge per text.
On November 20, 2012, the NTC rendered a decision directing Globe to:
1. Reduce its REGULAR SMS Retail rate from P1.00 to not more than P0.80
2. Refund/reimburse its subscribers the excess charge of P0.20
3. Pay a fine of P200.00 per day from December 1, 2011 until date of compliance.
On May 7, 2014, NTC denied the Motion for Reconsideration (MR) filed by Globe last December 5, 2012 in
relation to the November 20, 2012 decision. Globe stands on its legal position that it is compliant with the
NTC‘s Memorandum Circular No. 02-10-2011 and did not violate said circular when it did not reduce the
SMS retail rate. On June 9, 2014, Globe filed its petition for review of the assailed NTC decision and
resolution denying Globe's MR with the Court of Appeals.
Competitive industry
With current operators seeking to fortify market share in both the mobile and broadband segments,
competition in the Philippine telecommunications industry has remained intense over the past couple of
years, although such intensity has not translated into price wars and value deterioration. Today, Globe‘s
principal competitor is the PLDT Group (composed of PLDT, Smart and Digitel), becoming a two-player
market following PLDT‘s acquisition of Digitel in October 2011. It must be noted further that the potential for
new entrants continue to loom over the industry, given that the Philippine telecommunications market is one
of the few two-player markets globally.
The Philippine telecommunications industry continues to be dominated by the mobile segment which
contributed an estimated 66% of the total industry revenues in 2013, higher than the 63% contribution it
registered in 2012. Mobile subscriber growth has slowed down with the nominal penetration rate now
estimated at 110.0%. Industry revenue growth has likewise slowed in recent years, growing only by 5% in
2013.
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 2013 and 2012 accounted for 80% and 81%, respectively of its total service revenues.
44
Management of Risks Related to Industry
Globe‘s fundamental strengths and strategies to address the risks related to competition in the industry
are discussed on pages 68-69 of this Prospectus.
Operational Risk
The quality and reliability of Globe‘s telecom services are dependent on the stability of its network,
and the networks of the other service providers with which it interconnects. These networks are
vulnerable to damage or service interruptions due to natural disasters, catastrophes, acts of war or
terrorism, system failures, among others, which could lead to subscriber loss, foregone revenues, and
damaged brand reputation.
Globe also is dependent on key suppliers and third party providers for the supply and maintenance of
equipment and services that the company needs to operate its network and operate its business.
Supply chain problems could cause delays and disrupt the company‘s operations.
Management of Risks Related to Operations
Over the years, Globe has made several investments towards building a more geographically diverse
network – including its second Fiber Optic Backbone Network (―FOBN‖) for its domestic transmission
network, and additional international submarine cable facilities such as Tata Global Network – Intra Asia
cable system (―TGN-IA‖) which was completed in March 2009 and Southeast Asia Japan Cable System
(―SJC‖) which was completed last February 2013. The network modernization program also
encompasses the construction of a more resilient and business continuity capable network that
includes not just the transmission layer but also the core network and facilities.
For its network modernization program, Globe is shifting from a multi-vendor to single vendor network
with Huawei as the selected technology partner and Alcatel-Lucent, a network transformation leader, as
project manager. For its Information Technology (IT) transformation programs, Globe has selected
Amdocs, a global market leader in customer experience systems and innovation. While a single-vendor setup carries concentration risks, it also brings significant benefits and synergies including higher bundling
discounts, lower maintenance costs, reduced operational risks with better hardware and software
compatibility across components. Huawei also has committed to establish a Joint Innovation Center
(JIC) with Globe to bring the latest technological developments to the country. Through JIC, Globe
hopes to learn best practices and tap into the latest developments of the R&D centers that Huawei has
around the world.
Risk Management Process of the Company
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 process.
As part of its annual planning cycles, 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 monitored through various control mechanisms.
Globe employs a two-dimensional view of risk monitoring. Business unit or functional group level
leaders regularly monitor the status of operational, legal, financial, project risks that may threaten the
achievement of defined business outcomes and are accountable for the completion of the approved
mitigation plans meant to address the risks to the business. Senior management‘s oversight of
enterprise level risks includes strategic risks, major programme risks, regulatory risks and the status of
risk mitigation plans as they relate to the attainment of key business objectives.
45
The network modernization and IT transformation program is one of the initiatives that will provide
the resiliency of the systems. Alongside the IT transformation program, information and network security
is also being strengthened to prevent and withstand cyber threats. This includes the establishment of
necessary monitoring and preventive tools to mitigate the threat of cyber security. Also, Globe has an
internationally-certified information security management system to detect and prevent security intrusions.
To ensure continuing protection against these threats, Globe conducts a regular risk assessment to
identify and immediately address gaps in the controls.
Furthermore, Globe also has in place an enterprise-wide Business Continuity Management (BCM)
program that is internationally certified to British Standards 25999. BCM is an integral component to
Globe Telecom‘s Enterprise Risk Management (ERM) program and is a high priority aligned to our
commitment to customers to continuously improve capabilities that will help reduce the probability,
shorten the period and limit the impact of any disruption. The program has executive management
support and oversight and has the organizational structure, framework and funding to implement it.
Globe‘s BCM policy prioritizes the safety of its people and the continuity of operations and critical
resources that support the delivery of key products and services.
One major component of the BCM program is risk reduction. Globe has put in place measures to mitigate
the threats and reduce the risk of disruption. These include the establishment and continuous
improvement of process-related controls as well as employing the latest technologies. For floods,
storms and other natural hazards, Globe makes sure that its structures comply with the National Building
Code and the National Structural Code of the Philippines as well as its own engineering guidelines that are
based on international standards.
For fire and other safety-related threats, Globe ensures that it complies with international health and safety
standards in addition to putting in place the necessary fire preventive, detective and control systems. For
acts of terrorism, Globe has partnered with government authorities in securing the sites and its people,
and implemented corporate social responsibility (CSR) programs in challenged communities to win the
trust and support of the members of such communities.
Foreign Exchange Risk
Globe‘s foreign exchange risk results primarily from movements of the Philippine peso (P) against the US
dollar (US$) with respect to its US$-denominated financial assets, liabilities, revenues and expenditures.
Approximately 17% of its total service revenues are in, or are linked to the US$ while substantially all of its
capital expenditures are in US$. In addition, 13%, 24% and 24% of debt as of December 31, 2012, 2013 and
March 31, 2014, respectively, are denominated in US$ 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 US$ 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.
46
Risks Associated with the Philippines
The growth and profitability of Globe will be influenced by the overall political and economic situation of
the Philippines. Any political or economic instability in the future may have a negative impact on the
Company‘s financial results.
Economic Considerations
For the year ended December 31, 2013, Philippine full-year GDP growth was at 7.2%, driven largely by
the Services sector, Trade and Real Estate, Renting & Business Activities, and Manufacturing. Despite
the occurrence of several natural disasters throughout the year, GDP growth exceeded the 6-7% growth
projection of the government. In the fourth quarter of 2013, the Philippines was marked as one of the
best performing economies in the Asian region, with GDP growth for the quarter at 6.5%.
Despite a decrease in GDP growth from 7.6% in 2012 to 7.1% in 2013, the Service Sector remains to be
the greatest contributor to the country‘s GDP. All subsectors under this sector contributed positive
percentage points to GDP growth, with Trade being the top contributor. In terms of growth, the Financial
Intermediation subsector had the highest growth, at 12.4% compared to 8.2% in 2012. This was followed
by Real Estate, Renting and Business Activities which grew from 7.5% to 8.4%.
Next to the Service Sector, the Industry Sector contributes the most to the country‘s GDP, led by the
Manufacturing subsector, which is the top contributor of the sector‘s growth in 2013. Manufacturing
posted a significant growth of 10.5%, compared to 5.4% in 2012 and is the only subsector that posted a
higher growth from the previous year, compensating for the decline in public and private construction,
mining and quarrying, and electricity, gas and water supply subsectors. The Industry Sector, as a whole,
reported a 9.5% growth from 6.8% in the previous year.
For the Agricultural Sector, growth was at 1.1%, a decline from the 2.8% growth of the previous year.
This decline was largely due to Typhoon Yolanda which severely affected crops in the Visayas region.
The leading contributor to growth for the Agricultural Sector was Palay, followed by Poultry and
Livestock.
On the demand side, there is a decline in government spending from 12.2% in 2012 to 8.6% in 2013,
due mainly to decline in expenditures for Personnel services and Maintenance and other operating
expenses for the government. Despite this, high consumer spending, investments in fixed capital
formation, and growth in international trade were able to mitigate the decline in government expenditures
and contribute to a healthy GDP growth for the year.
In March 2013, Fitch Ratings upgraded the Philippines‘ credit rating to investment grade, raising the
country‘s credit rating on its long-term foreign currency issuer default rating (IDR) to BBB- from BB+,
citing the resilience of the country‘s economy and the fiscal discipline of the government. In May 2013,
Standard & Poor‘s also raised the Philippines‘ credit rating on its long-term foreign currencydenominated debt from BB+ to BBB-, brought about by the country‘s strengthening external position,
moderating inflation, and the declining reliance on foreign currency debt. Likewise, in October 2013,
Moody‘s has raised the Philippines to an investment grade rating, upgrading the country‘s government
rating to Baa3 from Ba1, with a positive outlook, noting the country‘s healthy economic performance, low
inflation, and improved fiscal management.
In May 2014, S&P upgraded the Philippines‘ credit rating to one notch above investment grade to BBB
on the back of ongoing reforms to address shortcomings in structural, administrative, institutional, and
governance areas which are expected to endure beyond the current administration. S&P also reported
that the resulting gains in government revenue generation, spending efficiency, and the improvements in
public debt profile and investment environment will at least be preserved in the medium term.
47
Economic experts remain positive on the country‘s solid economic growth and are optimistic that this
economic success will continue in 2014. The government projects a growth of 6.5% to 7.5% for the year
2014, expecting a surge in foreign investments following the country‘s achievement of an investment
grade rating in 2013. The year 2014 also sees a growth in investments and government spending
following the recovery efforts from Typhoon Yolanda. External risks, however, will likely remain amid the
uncertainties in the global scene, particularly the debt and fiscal problem in the US and the continued
debt crisis in the Euro zone which could then again stall regional trade and capital flows. 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, including Globe‘s ability to enhance
the growth of its subscriber base, improve its revenue base and implement its business strategies.
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 the subject of 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
th
results. In June 2010, Benigno ―Noynoy‖ Aquino III was inaugurated as the 15 President of the
Philippines. The son of the late former President Corazon Aquino garnered over 40% of the vote and
has injected the country with renewed optimism.
The next presidential elections will be held in 2016. In May 2013, the Philippines held its midterm
elections where 12 of the 24 seats of the Senate and all of the seats of the House of Representatives
were elected. The officials elected were sworn in on June 30, 2013, midway through President Benigno
Aquino III‘s term of office.
On the judiciary, the Chief Justice of the Philippine Supreme Court, Renato Corona, was impeached,
when a total of 188 congressmen signed an impeachment complaint against the Chief Justice for graft
and corruption, betrayal of the public trust and culpable violation of the Philippine Constitution. The
impeachment trial, which has been estimated to last anywhere between 3 to 12 months, began in
January 16, 2012 and ended on May 29, 2012 when Chief Justice Corona was found guilty of Article II of
the Articles of Impeachment, pertaining to his failure to disclose to the public his statement of assets,
liabilities, and net worth. Chief Justice Corona was appointed by Former President Gloria MacapagalArroyo, and is the first Philippine Chief Justice to be impeached and placed on trial.
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.
48
Risks Associated with the Preferred Shares
Payment on Dividends of Preferred Shares
Dividends on the Preferred Shares may not be paid in full, or at all. Under the terms and
conditions governing the Preferred Shares, the Company may pay no dividends or less than full
dividends on a Dividend Payment Date. Holders of the Preferred Shares will not receive
dividends on a Dividend Payment Date or for any period during which the Issuer does not have
retained earnings out of which to pay dividends.
If the profits available to distribute as dividends are, in Globe's Board opinion, not sufficient to
enable the Issuer to pay in full on the same date both dividends on the Preferred Shares and the
dividends on other shares that have an equal right to dividends as the Preferred Shares, the Issuer
is required first, to pay in full, or to set aside an amount equal to, all dividends scheduled to be
paid on or before that dividend payment date on any shares with a right to dividends ranking in
priority to that of the Preferred Shares; and second, to pay dividends on the Preferred Shares
and any other shares ranking equally with the Preferred Shares as to participation in profits pro rata
to the amount of the cash dividends scheduled to be paid to them. The amount scheduled to be
paid will include the amount of any dividend payable on that date and any arrears on past
cumulative dividends on any shares ranking equal in the right to dividends with the Preferred Shares.
Subordination to the Issuer’s Other Indebtedness
Globe‘s obligations in respect of the Preferred Shares are subordinated to all of the
Company‘s indebtedness, and it will not make any payments under the Preferred Shares unless it
can satisfy in full all of its other obligations that rank senior to the Preferred Shares.
Globe‘s obligations under the Preferred Shares are unsecured and will, in the event of the windingup of the Company, rank junior in right of payment to all indebtedness of the Company and junior in
right of payment to securities of, or claims against, the Company which rank or are expressed
to rank senior to the Preferred Shares. Accordingly, Globe‘s obligations under the Preferred Shares
will not be satisfied unless Globe can satisfy in full all of its other obligations ranking senior to
the Preferred Shares.
There are no terms in the Preferred Shares that limit Globe‘s ability to incur additional
indebtedness, including indebtedness that ranks senior to or pari passu with the Preferred Shares.
Insufficient Distributions upon Liquidation
In the event of liquidation, the Non-Voting Preferred Shares shall rank ahead of the Common Shares
and equally with the Voting Preferred Shares. The Board of Directors shall prescribe the amount
which shares of such series shall be entitled to receive in the event of any liquidation, dissolution or
winding up of the Corporation, which shall not exceed the consideration received therefore plus
accrued and unpaid dividends thereon nor be less than the par value thereof.
Upon any voluntary or involuntary dissolution, liquidation or winding up of Globe, holders of
Preferred Shares will be entitled only to the available assets of the Company remaining after the
Company‘s indebtedness is satisfied. If any such assets are insufficient to pay the full amount due
to the holders of the Preferred Shares, then holders of Preferred Shares shall share ratably in any
such distribution of assets in proportion to the full distributions to which they would otherwise be
respectively entitled.
49
Ability to Make Payments under the Shares is Limited by Terms of Globe’s Other Indebtedness
Globe has and will continue to have a certain amount of outstanding indebtedness. The current
terms of Globe‘s financing agreements contain provisions that could limit the ability of the Company
to make payments on the Preferred Shares. For example, if Globe were in default on its payment
obligations to one or more of its lenders, or if it is non-compliant with certain covenants and such
non-compliance is uncured for a period of 30 days, the Company may be prohibited from
making cash payments in respect of the Preferred Shares. Also, Globe may in the future,
directly or indirectly through its subsidiaries, enter into other financing agreements which may
restrict or prohibit the ability of the Company to make payments on the Preferred Shares. There
can be no assurance that existing or future financing arrangements will not adversely affect
Globe‘s ability to make payments on the Preferred Shares.
No Stated Maturity date and Globe has the Sole Right to Redemption
The Preferred Shares have no fixed maturity date, and the Preferred Shares are not repayable
in cash unless the Issuer, at its sole discretion, redeems them for cash. Furthermore, holders of
the Preferred Shares have no right to require the Issuer to redeem the Preferred Shares. The
Preferred Shares are only redeemable at the option of the Issuer on the Optional Redemption
Date, at any time in the event that Dividend Payments become subject to additional withholding tax
as a result of certain changes in law, rule or regulation, or in the interpretation thereof, and such
tax cannot be avoided by use of reasonable measures available to Globe or an occurrence of an
Accounting Event. Accordingly, if a Preferred Share holder wishes to obtain the cash value of the
investment, the holder will have to sell the Preferred Shares in the secondary market.
Lack of Public Market for the Shares
The Philippine securities markets are substantially less liquid and more volatile than major
securities markets in other jurisdictions, and are not as highly regulated or supervised as some of
these other markets. The Company cannot guarantee that the market for the Preferred Shares
will always be active or liquid upon commencement of their trading on the PSE. The nationality
restriction on ownership of the Preferred Shares may also restrict the trading and liquidity of the
Shares.
Limited Liquidity
The Underwriters are not obligated to create a trading market for the Preferred Shares and any
such market making will be subject to the limits imposed by applicable law, and may be
interrupted or discontinued at any time without notice. Accordingly, the Company cannot predict
whether an active or liquid trading market for the Preferred Shares will develop or if such a market
develops, if it can be sustained. Consequently, a holder may be required to hold his Preferred
Shares for an indefinite period of time or sell them for an amount less than the Offer Price.
Non-payment of Dividends May Affect the Trading Price of the Preferred Shares
If dividends on the Preferred Shares are not paid in full, or at all, the Preferred Shares may trade at
a lower price than they might otherwise have traded if dividends had been paid. The sale of
Preferred Shares during such a period by a holder of Preferred Shares may result in such holder
receiving lower returns on the investment than a holder who continues to hold the Preferred
Shares until dividend payments resume. In addition, because of the dividend limitations, the
market price for the Preferred Shares may be more volatile than that of other securities that do not
have these limitations.
50
Inability to Reinvest at a Similar Return on Investment
On the Rate Re-Setting Date, or any Dividend Payment Date thereafter, or at any time
redemption due to taxation occurs, Globe may redeem the Preferred Shares for cash at the
redemption price, as described in „„Description of the Shares‟‟. At the time of redemption,
interest rates may be lower than at the time of the issuance of the Preferred Shares and,
consequently, the holders of the Preferred Shares may not be able to reinvest the proceeds at a
comparable rate of return or purchase securities otherwise comparable to the Preferred Shares.
No Voting Rights
Holders of Preferred Shares will not be entitled to elect the Directors of the Company. Except
as specifically set forth in the Articles and as provided by Philippine law, holders of Preferred
Shares will have no voting rights (see ‗‗Description of the Shares‟‟).
Restrictions on Foreign Ownership of Globe’s Shares by Non-Philippine Nationals
Under Philippine law, no franchise, certificate, or any other form of authorization for the operation
of public utility shall be granted except to citizen of the Philippines or to corporations or
associations organized under the laws of the Philippines at least 60% of whose capital is owned by
such citizens. Accordingly, the Preferred Shares may be owned or subscribed by or transferred
to any person, partnership, association or corporation regardless of nationality, provided that at
any time at least 60% of the Company‘s outstanding capital stock shall be owned by citizens of the
Philippines or by partnerships, associations or corporations, 60% of the voting stock or voting
power of which is owned and controlled by citizens of the Philippines.
51
USE OF PROCEEDS
Globe expects to raise gross proceeds amounting to approximately P7,000,000,000.00 from the
Offer. In the event that the Oversubscription Option is exercised in full, the Company expects to
raise gross proceeds from the Offer of P10,000,000,000.00.
The following are the estimated expenses to be incurred in relation to the Offer:
SEC Registration Fees
PSE Processing and Listing Fees
Documentary Stamp Tax
Underwriting, and Selling Fees
Professional Expenses
Other related expenses
Total
P
P
P
P
P
P
P
Without
Oversubscription
3,093,125.00
7,056,000.00
35,000,000.00
26,344,086.02
4,550,000.00
900,000.00
76,943,211.02
With
Oversubscription
3,093,125.00
10,056,000.00
50,000,000.00
37,634,408.60
4,550,000.00
900,000.00
106,233,533.60
Globe expects to use the net proceeds from the Offer, estimated to be P6,923,056,788.98, or
P9,893,766,466.40, assuming the Oversubscription Option is fully exercised, after deducting the above
expenses.
Net Proceeds from the Offering will be used by Globe to partially finance its capital expenditure
(―CAPEX‖) requirements for 2014.
1
The Company‘s planned CAPEX for 2014 is estimated at approximately US$650 million. To sustain the
growing demand for data connectivity, both in terms of wireless services and data solutions to the home,
Globe intends to continue to invest in its data network, including investments in 3G, LTE and fixed
2
broadband solutions. Of the US$650 million CAPEX, approximately 52% or $335 million is envisioned
to be spent for investments related to data capacities, including deployment of 3G, HSPA+ and Long
Term Evolution (LTE) sites, roll-out for DSL broadband, LTE @Home and other fixed broadband
solutions as well as capacities for leased lines for the corporate data segment. The amount likewise
includes investments in international cable facilities and transmission capacities.
3
Moreover, about US$150 million of the 2014 CAPEX are carry-over spend from the network and IT
transformation efforts launched in the prior years. The balance of the 2014 CAPEX program is for other
general and administrative CAPEX.
The CAPEX for 2014 shall be funded by this preferred share issuance, a P7.0 billion term loan signed
with Landbank of the Philippines last December 2013, and internally generated cashflows of the
Company. The company may also enter into bank loan facilities later in the year.
The Company intends to disburse the proceeds from the preferred share issuance as and when
payments from any of the CAPEX projects fall due, to expedite usage of the proceeds. While the
Company is targeting full disbursements of the proceeds within 2014, depending on the timely execution
of the programs, it does not envision any significant delays beyond the first quarter of 2015. Undisbursed
proceeds from the issuance shall be temporarily placed in time deposit and special deposit accounts,
consistent with the Company‘s policies on the investment of excess cash.
1
P27,950,000,000 based on exchange rate of US$1:P43.000
P14,405,000,000 based on exchange rate of US$1:P43.000
3
P6,450,000,000 based on exchange rate of US$1: P43.000
2
52
Apart from expenses of the Offer described in this section, the proceeds shall not be used to pay Globe‘s
financial obligations with any of its Underwriters.
On the breakdown of expenses, professional expenses are more specifically:
Legal Fee –Underwriters
Auditors Fee
P
P
1,650,000.00
2,900,000.00
P
P
P
300,000
500,000
70,000
Other related expenses are more specifically:
Printing Cost
Publication Fee
Miscellaneous Expenses
In the event of any deviation or adjustment in the planned use of proceeds, the Company shall inform
the SEC, the PSE, and the stockholders of the same within 30 days before such deviation or adjustment
is implemented. Any material or substantial adjustment to the use of proceeds, as indicated above, shall
be approved by Globe‘s Board of Directors and shall be disclosed to the SEC and the PSE. In addition,
Globe shall submit to the PSE Electronic Generation Technology (EDGE) the following to ensure
transparency in the use of proceeds:
a. Any disbursement made in connection with the planned use of proceeds from the Offer;
b. Quarterly Progress Report on the application of the proceeds from the Offer or on or before the
first fifteen (15) days of the following quarter, certified by Globe‘s Chief Financial Officer and
external auditor;
c.
Annual Summary of the application of proceeds on or before January 31 of the year following
the public offering, certified by Globe‘s Chief Financial Officer and external auditor; and
d. Certification of an external auditor on the accuracy of the information reported by the Company
to the exchange in the quarterly and annual reports.
The Quarterly Progress Report and Annual Summary required in items (b) and (c) above shall include a
detailed explanation of any material variances between the actual disbursements and the planned use of
proceeds in the work program of the Prospectus, if any. The detailed explanation shall also state the
approval of the Globe‘s Board of Directors as required in item (d) above.
53
PLAN OF DISTRIBUTION
The offer by the Company of the Preferred Shares is purely domestic and will not include an
international offering. The Company plans to issue the Preferred Shares through the Underwriters,
namely, BPI Capital Corporation, BDO Capital, and SB Capital. BPI Capital has likewise been
appointed by the Company to act as Issue Manager for the Offer. The Trading Participants, who
are member-brokers of the PSE, shall act as Selling Agents for the Offer, pursuant to the PSE‘s
rules and regulations.
OBLIGATIONS OF THE UNDERWRITERS AND SELLING AGENTS
In accordance with the Underwriting Agreement to be entered into with Globe, the Underwriters have
agreed to underwrite up to P7,000,000,000.00 of Preferred Shares at the Offer Price on a firm basis, and
to distribute and sell the Preferred Shares in the Offer, subject to the satisfaction of certain conditions, in
consideration for certain fees and expenses.
Each of the Underwriters has committed to underwrite the Offer up to the amount indicated below:
BPI Capital
BDO Capital
SB Capital
TOTAL
P 3,500,000,000.00
2,100,000,000.00
1,400,000,000.00
P 7,000,000,000.00
Prior approval from the SEC is required to effect a termination of the Underwriting Agreement.
The Underwriters may enter into other sub-underwriting agreements with other underwriters
who may want to participate in the issuance. There is no agreement for any of the
Underwriters to put back to Globe any unsold Preferred Shares.
The Company has granted the Joint Lead Underwriters the option to subscribe, on a firm basis, up to
an additional 6,000,000 Preferred Shares equivalent to P3,000,000,000, on the same terms and
conditions set forth in this Prospectus, solely to cover oversubscriptions, if any.
On August 8, 2014, the Underwriters partially exercised the oversubscription option for an additional
3,211,430 Preferred Shares equivalent to P1,605,715,000 allocated among the Underwriters as
follows:
BPI Capital
BDO Capital
SB Capital
TOTAL
P 704,807,500.00
252,154,500.00
648,743,000.00
P 1,605,715,000.00
During the Offer Period, the Underwriters may further exercise the option to subscribe to the
remaining 2,788,570 Preferred Shares at an aggregate issue price of P1,394,285,000 solely to cover
oversubscriptions. Once exercised and subject to the consent of Globe, any such Preferred Shares
will also be deemed underwritten on a firm basis. If the oversubscription option is not fully exercised,
any of the 2,788,570 Preferred Shares that remain unsold at the end of the Offer Period will remain
unissued under the shelf registration procedures provided for by the SRC and its Implementing Rules
and Regulations.
The Underwriters are duly licensed by the SEC to engage in the underwriting or distribution of
the Preferred Shares. The Underwriters may, from time to time, engage in transactions with and
perform services in the ordinary course of its business for the Company or other members of the
Globe Group.
54
Except for BPI Capital, the Underwriters have no direct relations with Globe in terms of ownership
by either of their respective major stockholder/s. BPI Capital is a wholly owned subsidiary of
BPI. Globe and BPI are affiliated companies, each having Ayala Corporation as a major
shareholder.
The Underwriters do not have a contract or other arrangement with the Company under which any
of the Underwriters may put back to the Company any unsold securities of the Offer. The
Underwriters do not have any direct or indirect interest in the Company or in any securities thereof
including options, warrants or rights thereto. The Underwriters do not have any right to designate or
nominate any member of the Company‘s Board.
SALE AND DISTRIBUTION
The distribution and sale of the Preferred Shares shall be undertaken by the Underwriters who
shall sell and distribute the Preferred Shares to third party buyers/investors. The Underwriters are
authorized to organize a syndicate of sub-underwriters, soliciting dealers and/or agents for the
purpose of the Offer. Of the 14,000,000 Preferred Shares to be offered, 80% or 11,200,000 shares
are being offered through the Underwriters for subscription and sale to Qualified Institutional Buyers
and the general public. The Company plans to make available 20% or 2,800,000 shares for
distribution to the respective clients of the 133 Trading Participants of the PSE, acting as Selling
Agents. Each Trading Participant shall be allocated 21,050 shares (computed by dividing the
Preferred Shares allocated to the Trading Participants by 133), subject to reallocation as may be
determined by the PSE. The balance of 350 shares shall be allocated by the PSE among the
Trading Participants. Trading Participants may undertake to purchase more than their allocat ion of
21,050 shares. Any requests for shares in excess of 21,050 shares may be satisfied via the
reallocation of any Preferred Shares not taken up by other Trading Participants.
The Company will not allocate any Preferred Shares for the Local Small Investors. As defined in the
PSE Revised Listing Rules, a Local Small Investor is a share subscriber whose subscription does
not exceed P25,000.00. The Offer will have a minimum subscription amount of P50,000.00, which
is beyond the prescribed maximum subscription amount for Local Small Investors.
Prior to the close of the Offer Period, any Preferred Shares not taken up by the Trading Participants
shall be distributed by the Underwriters directly to their clients and the general public.
All Preferred Shares not taken up by the Trading Participants, general public and the Underwriters‘
clients shall be purchased by the Underwriters pursuant to the terms and conditions of the
Underwriting Agreement. Nothing herein or in the Underwriting Agreement shall limit the rights of
the Underwriters from purchasing the Preferred Shares for their own respective accounts.
The obligations of each of the Underwriters will be several, and not joint and solidary, and
nothing in the Underwriting Agreement shall be deemed to create a partnership or joint venture
between and among any of the Underwriters. Unless otherwise expressly provided in the
Underwriting Agreement, the failure by any Underwriter to carry out its obligations thereunder
shall not relieve any other Underwriter of its obligations thereunder, nor shall any Underwriter be
responsible for the obligations of any other Underwriter thereunder.
TERM OF APPOINTMENT
The engagement of the Underwriters shall subsist so long as the SEC‘s permit to sell the
Preferred Shares remains valid, unless otherwise terminated by the Company and the Underwriters.
The underwriting and selling fees to be paid by the Company to the Issue Manager in relation to the
Offer shall be equivalent to 0.35% of the gross proceeds of the Offer. This shall be inclusive of
underwriting fees to be paid to the Underwriters and sub-underwriters, if any, and selling
55
commissions to be paid to the Trading Participants, which selling commissions shall be equivalent
to 0.175% of the total proceeds from the sale of the Preferred Shares by such Selling Agent.
The Underwriting Agreement may be terminated by the Underwriters prior to payment being made
to the Company of the net proceeds of the Preferred Shares under certain circumstances such
as (a) a cancellation order from a Government authority, (b) a change or an impending change
of law that would materially and adversely affect Globe‘s profitability or (c) financial, political or
economic conditions in the Philippines which would materially and adversely affect the Offer.
MANNER OF DISTRIBUTION
The Underwriters shall, at their discretion, determine the manner by which proposals for
subscriptions to, and issuances of, Preferred Shares shall be solicited, with the primary sale of the
Preferred Shares to be effected only through the Underwriters and Selling Agents.
56
OFFER PERIOD
The Offer Period shall commence on August 11, 2014 and end at 5:00 p.m. on August 15,
2014. The Company and the Underwriters reserve the right to extend or terminate the Offer Period
with the approval of the SEC and the PSE.
57
DIVIDEND POLICY
Dividends declared by the Company on its stocks are payable in cash or in additional shares of stock.
The payment of dividends in the future will depend upon the earnings, cash flow and financial condition
of the Company and other factors.
Stock dividends, which come in the form of additional shares of stock, are subject to approval by both
the Company's Board of Directors and the Company's stockholders. No stock dividends have been
distributed since the 25% stock dividend back in 2002.
Common Stock Dividends
The dividend policy of Globe Telecom is to declare cash dividends to its common stockholders on a
regular basis as may be determined by the Board of Directors. 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.
On November 6, 2009, the Board of Directors amended the dividend payment rate from 75% to a range
of 75% - 90% of prior year‘s net income.
On November 8, 2011, the Board of Directors amended the Company‘s dividend policy to be based on
core instead of reported net income. Pay-out range remains at 75% to 90%. This is to ensure that
dividends will remain sustainable and yields competitive despite the expected near-term decline in net
income that would result from the accelerated depreciation charges related to assets that will be
decommissioned as part of the Company‘s network and IT transformation programs. As currently
defined, core net income excludes all foreign exchange, mark-to-market gains and losses, as well as
non-recurring items.
On August 6, 2013, the Board of Directors approved the proposed change in the frequency of the cash
dividend distribution from semi-annual to quarterly beginning first quarter of 2014. The quarterly cash
dividends will continue to be based on the policy of 75%-90% of prior year‘s core net income. The
amended frequency in the payouts will provide the Company with the better cash planning and liquidity
management and at the same time ensure a more consistent dividend distribution to the shareholders.
On December 10, 2013, the Company announced that the quarterly cash dividend distribution will be
implemented beginning in the third quarter of 2014 instead of the first quarter of 2014.
The dividend payout rate is reviewed annually by the Board of Directors, taking into account the
company‘s operating results, cash flows, debt covenants, capital expenditure levels and liquidity.
Voting Preferred Stock Dividends
The dividends for preferred shares are declared upon the sole discretion of the Board of Directors.
The following table summarizes the dividends declared and paid by Globe Telecom since 2011:
Cash Dividends – 2011
CLASS
On common shares
On preferred shares
PAYMENT DATE
March 18, 2011
September 19, 2011
March 18, 2011
March 18, 2012
RATE
P
= 31.00/share
P
= 31.00/share
P
= 0.29/share
P
= 0.22/share
TERM/RECORD DATE
February 22, 2011
August 22, 2011
February 22, 2011
December 29, 2011
58
CLASS
On common shares
PAYMENT DATE
March 16, 2012
September 18, 2012
January 24, 2013
RATE
P
= 32.50/share
P
= 32.50/share
P
= 0.21/share
TERM/RECORD DATE
February 24, 2012
August 28, 2012
December 27, 2012
On preferred shares
PAYMENT DATE
March 12, 2013
September 13, 2013
December 8, 2013
RATE
P
= 33.50/share
P
= 33.50/share
P
= 0.15/share
TERM/RECORD DATE
February 19, 2013
August 22, 2013
November 22, 2013
CLASS
On common shares
PAYMENT DATE
March 20, 2014
RATE
P
= 37.50/share
TERM/RECORD DATE
February 26, 2014
On preferred shares
CLASS
On common shares
Non-Voting Preferred Stock Dividends
The rate to be determined by the Board of Directors at the time of issue which may be fixed or variable.
The Board of Directors shall prescribe the cumulation or non-cumulation of dividends, the date or dates
of cumulation or accrual but dividends shall be deemed to be cumulative from date of issue unless
otherwise specified in the resolution creating such series, the conditions and restrictions, if any, on the
payment of dividends. The Non-Voting Preferred Shares shall not participate in dividends declared as
regards any other class of Shares.
On April 8, 2014, the Board resolved to delegate to the Finance Committee the authority to determine
and fix the number of shares per series, the price, the dividend rate, the pertinent rights, preferences,
redeemability, limitations and such other features of the Preferred shares at the time of issue, including
the appointment of all other necessary parties and enter into, execute and deliver all agreements with
the Corporation in respect of transactions related to such offer and issuance.
The Finance Committee shall determine the dividend rate of the Preferred Shares at the time of Issue.
Dividend Policy of Globe‘s Subsidiaries
Globe‘s subsidiaries declare dividends based on the amount of unrestricted retained earnings of the
previous year, as well as the existence of excess cash funds which are not expected to fund capital
expenditures or fund internal growth in the coming year.
Cash Dividends from Subsidiaries
PAYMENT DATE
Innove Communications, Inc.
Entertainment Gateway Group Corp.
AMOUNT (In Mlns)
TERM/RECORD
DATE
December 31,
2012
March 7, 2013
2,000
August 7, 2013
1,000
March 5, 2012
1,500
November 28, 2012
1,000
November 21, 2011
1,500
October 31, 2012
September 30,
2011
April 8, 2013
25
March 8, 2013
May 7, 2013
74
March 8, 2013
May 31, 2013
December 31,
2011
59
CAPITALIZATION
The following table sets out the unaudited consolidated long-term debt and capitalization of the
Company as of March 31, 2014 and as adjusted to give effect to the issuance of the Preferred
Shares. This table should be read in conjunction with the Company‘s unaudited interim condensed
consolidated financial statements and the related notes thereto as of and for the period ended
March 31, 2014 attached to this Prospectus.
As of March 31, 2014
(Unaudited)
In P Thousands
Actual
As Adjusted
Assuming a
7.0 Billion
Offer
As
Adjusted
Assuming a
10.0 Billion
Offer
Liabilities- net of debt issuance costs
Short-term debt ……………………………………………
Current portion of long-term debt ………………………
Long-term debt (net of current portion) …………………
Total long-term debt…………………………………………
2,240,450
6,116,941
61,527,092
67,644,033
2,240,450
6,116,941
61,527,092
67,644,033
2,240,450
6,116,941
61,527,092
67,644,033
Equity Attributable to Equity Holders of the Company
Preferred stock- Series A P50 par value per share ……
Preferred stock Voting ……………………………………
Common stock………. ……………………………………
Subscribed…………. …………………………………….
Additional paid in capital………………… ………………
Share-based payments……………………………………
Other reserves…………………………………………….
Retained earnings…………………………………………
Parent company preferred shares held by subsidiaries
Treasury stock…………………………………………….
0
792,575
6,633,831
7,426,406
27,046,860
204,236
(699,168)
5,689,580
-
700,000
792,575
6,633,831
8,126,406
33,346,860
204,236
(699,168)
5,689,580
-
1,000,000
792,575
6,633,831
8,426,406
36,046,860
204,236
(699,168)
5,689,580
-
Non-controlling interests………………………………
Total equity…………………………………………………
Total capitalization………………………………………
(1,158)
39,666,756
34,473,266
(1,158)
46,666,756
41,473,266
(1,158)
49,666,756
44,473,266
60
DILUTION
The Company is offering to the public 14,000,000 Preferred Shares, with an Oversubscription
Option of up to an additional 6,000,000 Preferred Shares with a par value of P50.00 per share to be
issued from unissued Non-Voting Preferred Share Capital. The issuance of the Preferred Shares
will not have any dilutive effect on the earnings per common share (EPS) of the Company, since
the Preferred Shares are not convertible to common shares. Therefore, the outstanding number
of common shares that will be used in computing the EPS will not change.
During the annual meeting of the stockholders of Globe Telecom, Inc. held on April 8, 2014, the
stockholders approved to amend the Seventh Article of the Articles of Incorporation to reclassify
31,000,000 Unissued Common Shares with par value of P50 per share and 90,000,000 Unissued Voting
Preferred Shares with par value of P50 per share into a new class of 40,000,000 Million non-voting
Preferred Shares with par value of P50 per share. The non-voting preferred shares shall be redeemable,
non-convertible, non-voting, and cumulative and may be issued in series. While maintaining the same
level of authorized capital stock, the amendment will create a new class of non-voting preferred shares,
which will be issued, offered and listed. The issuance and offering of the non-voting preferred shares will
fund the Company‘s capital expenditures.
On June 5, 2014, the Securities and Exchange Commission approved the amendment to the Seventh
Article of the Company‘s Articles of Incorporation to implement the foregoing reclassification of shares.
The dividends for preferred shares are declared upon the sole discretion of the Globe Telecom‘s Board
of Directors.
61
DETERMINATION OF OFFER PRICE
The Offer Price of P500.00 is at a premium to the Preferred Shares‘ par value per share of P50.00.
The Offer Price was arrived at by dividing the desired gross proceeds of approximately P7.0 billion
(or P10.0 billion in the event that the Oversubscription Option is exercised in full) by the target
amount of Preferred Shares allocated for the Offer.
62
THE COMPANY
Globe Telecom, Inc. is a major provider of telecommunications services in the Philippines, supported by
over 6,300 employees and over 890,000 retailers, distributors, suppliers, and business partners
nationwide. The Company operates one of the largest and most 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.
As of March 31, 2014, Globe had about 40.7 million mobile subscribers, over 2.2 million broadband
customers, and over 611,000 landline subscribers.
Globe is one of the largest and most profitable companies in the country, and has been consistently
recognized both locally and internationally for its corporate governance practices. Globe (as Globe
Mackay Cable and Radio Corporation) listed its common shares with the PSE on August 11, 1975,
becoming the first telecommunications company in the Philippines to go public. Its common shares are
listed on the Philippine Stock Exchange under the ticker symbol GLO and had a market capitalization of
P221.0 billion as of June 19, 2014.
Globe created a new class of voting preferred shares in the year 2000. In 2001, Globe entered into a
share swap transaction with Asiacom and acquired Isla Communications Co., Inc. (―Islacom‖) by issuing
158,515,021 Globe preferred shares at par value in exchange for 1.08 billion common shares of Islacom.
These Voting Preferred Shares were listed on the PSE on June 29, 2001 under the ticker symbol,
GLOPA.
The Company‘s principal shareholders are Ayala Corporation and Singapore Telecom, both industry
leaders in their respective countries. Aside from providing financial support, this partnership has created
various synergies and has enabled the sharing of best practices in the areas of purchasing, technical
operations, and marketing, among others.
Globe is committed to being a responsible corporate citizen. Globe BridgeCom, the company‘s umbrella
corporate social responsibility program, leads and supports various initiatives that (1) promote education
and raise the level of computer literacy in the country, (2) support entrepreneurship and micro-enterprise
development particularly in the countryside, and (3) ensures sustainable development through protection
of the environment and excellence in operations. Since its inception in 2003, Globe BridgeCom has
made a positive impact on the lives of thousands of public elementary and high school students,
teachers, community leaders, and 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. (EGG) and EGGstreme (Hong Kong) Limited (EHL)
(collectively referred here as EGG Group), is engaged in the development and creation of
wireless products and services accessible through telephones and other forms of
communication devices. It also provides internet and mobile value added services,
information technology and technical services including software development and related
63
services;

GTI Business Holdings, Inc. (GTI) is a wholly-owned subsidiary with authority to provide
VOIP services. Its wholly-owned subsidiaries are: GTI Corporation (GTIC US), a company
organized under the General Corporation Law of the State of Delaware for the purpose of
engaging in any lawful act or activity, Globe Telecom HK Limited (GTHK), a limited company
organized under the Companies Ordinance of Hong Kong, Globetel European Limited and
its subsidiaries namely: UK Globetel Limited, Globe Mobile' Italy S.r.l. (GMI) and Globetel
Internacional European España, S.L. UK Globetel Limited is a private limited company
under the Companies Act of 2006, wherein the registered address is in England and Wales;
Globe Mobile' Italy S.r.l. (GMI), is a limited liability company to perform, directly, and/or
through its subsidiaries, services such as voice calling, SMS, MMS, load top-up and mobile
data to Filipinos based in, or visiting Italy with registered address in Milan, Italy; Globetel
Internacional European España, S.L. with registered address in Barcelona, Spain;

Kickstart Ventures, Inc. (Kickstart), a wholly-owned subsidiary, is a pioneering business
incubator designed to provide aspiring technopreneurs with funds and facilities, mentorship
and market access needed to build new businesses. Flipside Publishing Services, Inc., a
subsidiary, is 40.94% owned by Kickstart; and

Asticom Technology, Inc. a wholly-owned subsidiary, is a system integrator and information
technology services provider to domestic and international markets.
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 (CMTS-GSM), (c) nationwide local
exchange carrier (LEC) services after being granted a provisional authority in June 2005, and (d)
international cable landing stations located in Nasugbu, Batangas and Ballesteros, Cagayan.
Globe is organized along three key customer facing units (CFUs) tasked to focus on the integrated
mobile and fixed line needs of specific market segments. The Company has a Consumer CFU with
dedicated marketing and sales groups to address the needs of retail customers, and a Business CFU
(Globe Business) focused on the needs of big and small businesses. Globe Business provides end-toend mobile and fixed line solutions and is equipped with its own technical and customer relationship
teams to serve the requirements of its client base. In early 2011, Globe organized an International
Business Group to serve the voice and roaming needs of overseas Filipinos, whether transient or
permanent. It is tasked to grow the Company‘s international revenues by leveraging on Globe‘s product
portfolio and developing and capitalizing on regional and global opportunities.
Business Segments
Mobile Business
Globe provides digital mobile communication services nationwide using a fully digital network based on
the Global System for Mobile Communication (GSM) technology. It provides voice, data and valueadded services to its mobile subscribers through three major brands: Globe Postpaid, Globe Prepaid
and TM.
Globe Postpaid includes all postpaid plans such as regular G-Plans and consumable G-Flex Plans, Load
Allowance Plans, Load Tipid Plans and Platinum Plans (for the high-end market). In 2010, the Company
introduced the MY SUPERPLAN and MY FULLY LOADED PLAN which allow subscribers to personalize
their plans, choose and combine various unlimited call, text and web browsing service options. In
addition, Globe has made available various add-on roaming and mobile browsing plans to cater to the
64
needs of its subscribers. In 2011, Globe further improved postpaid offerings with the All New My Super
Plan where subscribers are given the flexibility to create their own plans by either subscribing to an AllUnlimited Plan or an All-Consumable Plan. Subscribers also get to choose their freebies and add-ons
which they can change on a monthly basis. A fully-customizable unlimited data plan (Unli Surf Combo
Plan) was also made available to its subscribers in mid-2011 which provides uninterrupted unlimited
mobile surfing without the need for a WIFI connection. The data plan comes with consumable amounts
which the subscriber may use to either local and international calls and text messages. Taking the
product customization to the next level, the company launched in the second quarter of 2013 the BESTEVER MY SUPERPLAN with fully-customizable plan components, bigger plan value and more contract
periods to choose from (6, 12, 18, and 30 months). Each plan has a corresponding ―peso value‖ that
can be converted to avail of a combination of call, text, or surf services, free or discounted gadgets, and
a monthly consumable amount for more calls, texts and surf. In November 2013, Globe Postpaid
launched the iPhone Forever program bannering the latest phone from Apple (iPhone 5s and iPhone
5c). Under the iPhone Forever program, new and existing Globe subscribers who are loyal iPhone
users may swap their current devices to get a new iPhone every year for free or with minimal one-time
cash out.
Globe Prepaid and TM are the prepaid brands of Globe. Globe Prepaid is focused on the mainstream
market while TM caters to the value-conscious segment of the market. Each brand is positioned at
different market segments to address the needs of the subscribers by offering affordable innovative
products and services. In February 2012, the Company introduced a self-service menu that provides
Globe prepaid subscribers an easy access to avail of the latest promos and services of Globe by simply
dialing *143#. In early 2013, this menu was further developed with Globe Prepaid‟s GO SAKTO which
allows the subscribers to build their own promos (call, text and surf promos) that is best suited for their
needs and lifestyle.
Globe also provides its subscribers with mobile payments and remittance services under the GCash
brand. GCash transforms a mobile phone into a virtual wallet, enabling secure, fast, and convenient way
to transfer money at a cost of a text message. This service enables our subscribers to perform
international and domestic remittance transactions, pay fees, utility bills, income taxes, avail of microfinance transactions, donate to charitable institutions, and buy Globe prepaid reloads. A wide network of
local and international partnerships has been established over the years including government agencies,
utility companies, cooperatives, insurance companies, remittance companies,
and commercial
establishments, in order to make GCash an accepted mode of payment for various products and
services.
Globe Prepaid and TM subscribers can reload airtime value or credits using various reloading channels
including prepaid call and text cards, bank channels such as ATMs, credit cards, and through internet
banking. Subscribers can also top-up via AutoLoad Max retailers nationwide, all at affordable
denominations and increments. A consumer-to-consumer top-up facility, Share-A-Load, 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.
Globe has a loyalty and rewards program called My Rewards, My Globe for Globe Prepaid subscribers,
TM Astig Rewards for TM subscribers and Tattoo+ Rewards for Tattoo Broadband subscribers. Globe
Postpaid subscribers can earn points based on their monthly billed amounts in excess of their Monthly
Subscription Fee. Subscribers have the option to redeem rewards instantly, or accumulate points to
avail of higher value rewards.
Redeemed points in the form of telecom services is netted out against revenues whereas points
redeemed in the form of non-telco services such as gift certificates and other products are reflected as
marketing expense. At the end of each period, Globe estimates and records the amount of probable
future liability for unredeemed points.
In 2014, Globe Postpaid recently launched the Globe Blue or Platinum Rewards Cards. The new cards
can also work as a GCash Mastercard which can be used to shop anywhere within the Philippines and
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even abroad. Membership to Globe Blue is given to postpaid customers who spend an average of
P2,000 to P3,499 per month over a 12-month period. Meanwhile membership to the Globe Platinum is
given to postpaid customers who subscribe to plan P3,799 or spend an average of P3,500 to P4,999
over a 12-month period; and membership to Platinum Elite Rewards card is given to postpaid customer
who subscribe to All Net P5,000 or P10,000; roaming P5,000 or P10,000 or spend an average of P5,000
and above over a 12-month period. Special perks may vary depending on the plan subscription.
Mobile Voice
Globe‘s voice services include local, national and international long distance call services. It has one of
the most extensive local calling options designed for multiple calling profiles. In addition to its standard,
pay-per-use rates, subscribers can choose from bulk and unlimited voice offerings for all-day or off-peak
use, and in several denominations to suit different budgets.
Globe keeps Filipinos connected wherever they may be in the world, made possible by its tie-up with
over 700 roaming partners in more than 200 calling destinations worldwide. Globe also offers roaming
coverage on-board selected shipping lines and airlines, via satellite. Through its Globe Kababayan
program, Globe provides an extensive range of international call and text services to allow OFWs
(Overseas Filipino Workers) to stay connected with their friends and families in the Philippines. This
includes prepaid and reloadable call cards and electronic PINs available in popular OFW destinations
worldwide.
Mobile SMS, Mobile Browsing and Value-Added Services
Globe‘s Mobile SMS service includes local and international SMS offerings. Globe also offers various
bucket and unlimited SMS packages to cater to the different needs and lifestyles of its postpaid and
prepaid subscribers.
Globe‘s mobile browsing services allow subscribers to access the internet using their internet-capable
handsets, devices or laptops with USB modems. Data access can be made using various technologies
including HSPA+, 3G with HSDPA, EDGE and GPRS. Browsing subscribers also have multiple
charging options available with Globe‘s Flexible Mobile Internet Browsing rates which allow subscribers
to choose between time or usage-based rates. They can also choose between hourly, daily or monthly
browsing plans.
Globe‘s Value-Added Services offers a full range of downloadable content covering multiple topics
including news, information, and entertainment through its web portal. Subscribers can purchase or
download music, movie pictures and wallpapers, games, mobile advertising, applications or watch clips
of popular TV shows and documentaries as well as participate in interactive TV, do mobile chat, and play
games, among others. Additionally, Globe subscribers can send and receive Multimedia Messaging
Service (MMS) pictures and video, or do local and international 3G video calling.
Through Globe‘s partnership with major banks and remittance companies, and using Globe‘s pioneering
GCash platform, subscribers can perform mobile banking and mobile commerce transactions. Globe
subscribers can complete international and domestic remittance transactions, pay fees, utility bills and
income taxes, avail of micro-finance transactions, donate to charitable institutions, and buy Globe
prepaid load credits using its GCash-activated SIM.
Fixed Line and Broadband Business
Globe offers a full range of fixed line communications services, wired and wireless broadband access,
and end-to-end connectivity solutions customized for consumers, SMEs (Small & Medium Enterprises),
large corporations and businesses.
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Fixed Line Voice
Globe‘s fixed line voice services include local, national and international long distance calling services in
postpaid and prepaid packages through its Globelines brand. Subscribers get to enjoy toll-free rates for
national long distance calls with other Globelines subscribers nationwide. Additionally, postpaid fixed
line voice consumers enjoy free unlimited dial-up internet from their Globelines subscriptions. Low-MSF
(monthly service fee) fixed line voice services bundled with internet plans are available nationwide and
can be customized with value-added services including multi-calling, call waiting and forwarding, special
numbers and voice mail. For corporate and enterprise customers, Globe offers voice solutions that
include regular and premium conferencing, enhanced voice mail, IP-PBX solutions and domestic or
international toll free services.
Fixed Line Data
Fixed line data services include end-to-end data solutions customized according to the needs of
businesses. Globe‘s product offerings include international and domestic leased line services,
wholesale and corporate internet access, data center services and other connectivity solutions tailored to
the needs of specific industries.
Globe‘s international data services provide corporate and enterprise customers with the most diverse
international connectivity solutions. Globe‘s extensive data network allow customers to manage their
own virtual private networks, subscribe to wholesale internet access via managed international private
leased lines, run various applications, and access other networks with integrated voice services over
high-speed, redundant and reliable connections. In addition to bandwidth access from multiple
international submarine cable operators, Globe also has two international cable landing stations situated
in different locales to ensure redundancy and network resiliency.
The Company‘s domestic data services include data center solutions such as business continuity and
data recovery services, 24x7 monitoring and management, dedicated server hosting, maintenance for
application-hosting, managed space and carrier-class facilities for co-location requirements and
dedicated hardware from leading partner vendors for off-site deployment.
Other fixed line data services include premium-grade access solutions combining voice, broadband and
video offerings designed to address specific connectivity requirements. These include Broadband
Internet Zones (BIZ) for broadband-to-room internet access for hotels, and Internet Exchange (GiX)
services for bandwidth-on-demand access packages based on average usage.
Globe Business also launched in 2013 new cloud capabilities featuring the first large-scale, private and
public-ready, next generation cloud in Asia - the PayrollCloud application, an innovative Software-as-aService or SaaS providing on-time and accurate payroll accounting system – from automatic calculation
of salaries, standard time and attendance reports, biometric integration, online application and
customizable approval hierarchy and online payslip access. Another is its Backup-as-a-Service platform
which is the most advanced backup and restoration software, that enables continuous data protection,
local off-site storage and managed services to industries, enterprises as well as small and medium
businesses.
Broadband
Globe offers wired, fixed wireless, and fully mobile internet-on-the-go services across various
technologies and connectivity speeds for its residential and business customers. Tattoo@Home consists
of wired or DSL broadband packages bundled with voice, or broadband data-only services which are
available at download speeds ranging from 1 mbps up to 15 mbps. In selected areas where DSL is not
yet available, Globe offers Tattoo WiMAX, a fixed wireless broadband service using its WiMAX network.
Meanwhile, for consumers who require a fully mobile, internet-on-the-go broadband connection, Tattoo
On-the-Go allows subscribers to access the internet using HSPA+, 3G with HSDPA, EDGE, GPRS or
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Wi-Fi at various hotspots nationwide using a plug-and-play USB modem. This service is available in
both postpaid and prepaid packages. In addition, consumers in selected urban areas who require faster
connections have the option to subscribe to Tattoo Torque broadband plans using leading edge GPON
(Gigabit Passive Optical Network) technology with speeds of up to 100 mbps.
In September 2012, the Company officially launched its Long-Term Evolution (LTE) broadband service
with the Tattoo Black Postpaid Plans. The nomadic broadband plans are equipped with an LTE dongle
and LTE superstick that deliver browsing speeds of up to 42 Mbps and come with personalized customer
handling services such as a dedicated hotline, a relationship manager, and many other perks.
In 2013, Tattoo introduced its 4G product suite with the launch of Tattoo 4G Flash for only P995 with
surfing speeds of up to 7.2 Mbps. Tattoo At-Home on the other hand, offered free unlimited calls to
Globe/TM in every Tattoo@Home Broadband Bundle (landline + internet service). Meanwhile, Tattoo
Postpaid strengthens its lifestyle positioning with the unveiling of Tattoo-Enjoy Card which allows new
Tattoo Postpaid subscribers access to perks and discounts to over 240 brand partners nationwide.
Likewise, Tattoo Prepaid Lifestyle sticks with surfing speed of up to 12 Mbps was made available to
consumers for only P1,295. With the increasing demand for mobile Wi-Fi and faster internet
connectivity, Tattoo Prepaid re-launched its 4G SuperStick during the third period of 2013 with a more
affordable price of P1,995. Tattoo Postpaid also launched its new and improved postpaid personalized
and consumable plans with increased surfing speed now up to 42 Mbps. LTE plans starting at P1,299
was made available with FREE LTE dongle or pay a one-time fee of P2,000 for an upgrade to a mobile
Wi-Fi device. Tattoo consumable plans was further improved with more browsing hours (from 30 hours
to 50 hours) for Plan 299 and for Plan 499 (from 50 hours to 85 hours) also with an option to upgrade to
a mobile Wi-Fi device for only P150 per month. Another Tattoo revolutionary promo offer during 2013
was the most affordable tablet bundles, wherein its subscribers can get FREE three devices (Skyworth
S73 tablet or a Cloudpad 705W, a Blackberry Curve 9220 and the fastest broadband Wi-Fi stick) with
unlimited internet browsing and mobile text and call starting at Plan 1,298.
Principal Competitive Strengths of the Company
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.
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.
Financial Strength and Prudent Leverage Policies
Globe‘s financial position remains strong with ample liquidity, and gearing comfortably within bank
covenants. As of March 31, 2014, Globe had total interest bearing debt of P69.88 billion representing
64% of total book capitalization. Consolidated gross debt to equity ratio stood at 1.76 and is well within
the 2:1 debt to equity limit prescribed by its debt covenants. Additionally, debt to EBITDA stood at 1.91,
significantly lower than 3.1 covenant level.
While Globe's average current ratio was below the SEC's stated required minimum from 2010 to 2013,
Globe has more than sufficient cash flows from operations to meet its debt maturities, currently and
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prospectively. Looking at the industry also, Globe's current ratio was likewise at par with that of its major
competitor, in previous years and as of March 31, 2014.
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.
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.
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.
Key Strategies and Objectives
The year 2013 was continuously marked by intense competition as the mobile industry approaches
maturity. Existing players will further intensify efforts to increase market share primarily through
aggressive pricing offers and subsidy spending. While Globe expects to see continued growth in this
industry given the increasing affordability of smartphones and service offerings, the rate of growth will
likely be slower compared to prior years.
The current market situation brings much uncertainty. While overseas remittances continue to grow and
inflation has been manageable in 2011, it is difficult to anticipate the impact of the global slowdown on
domestic demand. The weaker consumer and business sentiment, and the impact of Peso volatility on
the spending behavior of OFW families, also presents downside risks that will loom over the markets in
the near term.
Amidst this uncertain environment, Globe will continue to focus on the fundamentals. Firstly, Globe will
continue to maximize the growth potentials of its core wireless business through relevant, easy-to-use
products delivered through a reliable network and industry-differentiating customer service. The
Company will sustain its focus on its priority segments for the mobile business – such as the OFW
families, the professionals, the entrepreneurs, the youth market, as well as the mass markets – providing
them with products and services attuned to their lifestyles and budgets.
Secondly, Globe will sustain its investments in broadband and new growth areas. Globe will specifically
strengthen its broadband service delivery capabilities and enhance network resiliency to ensure that the
demands of its target segments are met, both for the fixed and fully mobile broadband segments.
Thirdly, Globe will continue to enhance its cost structure to put it in a stronger position to provide
affordable products and services while investing in growth initiatives to serve the broader market.
Consistent with these strategies and objectives, Globe‘s ongoing network modernization and IT
transformation programs are aimed at significantly improving network quality and customer experience,
increase capacity, drive down costs, as well as prepare the network to meet the needs of customers.
Given the growing demand for bandwidth-heavy services, the modernization program will bring
significant improvements to network capacity leading to improved reliability, ease of access and
pervasive coverage. For the Company, this transformation effort will enable improved revenue growth
prospects, savings in capital spend and operating expenses, as well as efficiencies resulting from
69
synergies with a dedicated vendor partner in Huawei, which has technical expertise and strong track
record of success. By adopting the latest technologies available today, Globe will be in a better position
to provide the needs of its customers, secure and enhance its position in this highly competitive market.
The Company is at the same time implementing an IT transformation project to create streamlined and
integrated information environment, in response to changing market and business demands. The system
transformation effort is a comprehensive re-engineering of Globe Telecom‘s IT systems over the next
two years. This will result in convergent billings and more innovative product development, faster
response to customer queries and service requests by our stores and call centers. The endeavor will
result in quicker time-to-market for new products that adapt to changing customer needs, and timely
customer loyalty offers enabled by enhancements in customer segmentation and usage monitoring. For
the IT systems upgrade, Globe has selected Amdocs as technology partner, given its extensive
experience in business process transformation and access to leading edge technology.
Sales and Distribution Methods of Products and Services
Globe has various sales and distribution channels to address the diverse needs of its subscribers.
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 890,000 AutoloadMax retailers nationwide who offer prepaid
reloading services to Globe, TM, and Tattoo subscribers.
Globe Stores
As of March 31, 2014, the Company has a total of 186 Globe Stores all over 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.
In line with the Company‘s thrust to become a more customer-focused and service-driven organization,
Globe departed from the traditional store concept which is transactional in nature and launched the
redesigned Globe Store which carries a seamless, semi-circular, two-section design layout that allows
anyone to easily browse around the product display as well as request for after sales support. It boasts
of a wide array of mobile phones that the customers can feel, touch and test. There are also 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. Globe stores also include NegoStore areas, which serve as additional
sales channels for current and prospective Globe customers. Moreover, select stores also have ‗Tech
Coaches‘ or device experts that can help customers with their concerns on their smartphones. The
Company opened the first concept store in Greenbelt 4 in 2010 and accelerated its roll-out throughout
2011, averaging 4-5 new stores a month.
In 2012, Globe introduced other store formats in response to the need for more customer service
channels to accommodate more subscribers availing of Globe postpaid, prepaid and internet services.
The new store formats - the premium dealership store, pop-up store, microstore, kiosk, and store-on-the70
go – were carefully designed based on demographics, lifestyle and shopping behaviors of its customers,
each providing a different retail mix and experience to subscribers.
In 2013, Globe opened 50 concept stores and will open more concept stores in the country as part of its
commitment to a wonderful customer service experience.
Customer Facing Units
To better serve the various needs of its customers, Globe is organized along three key customer facing
units (CFUs) tasked to focus on the integrated mobile and fixed line needs of specific market segments.
The Company has a Consumer CFU with dedicated marketing and sales groups to address the needs of
individual 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. In early
2011, Globe organized an International Business Group to serve the voice and roaming needs of
overseas Filipinos, whether transient or permanent. It is tasked to grow the Company‘s international
revenues by leveraging on Globe‘s product portfolio and developing and capitalizing on regional and
global opportunities.
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 IDD prepaid loads are also available in public utility vehicles, street vendors, and selected
restaurants and retailers nationwide via the IDD Tingi load, an international voice scratch card in
affordable denominations.
Industry, Competitors and Methods of Competition
Mobile Market
The Philippine mobile market has expanded to a total industry SIM base of 111 million. But despite an
industry penetration rate of over 100% as of March 31, 2014, the market is continuously expanding due
to the rise in the demand for more non-traditional services especially in the form of mobile internet
browsing. With the growing penchant of Filipinos for smartphones, the mobile browsing business in the
Philippines presents more opportunities for revenue growth. Another possible area of growth in the
industry is through the switch of prepaid subscribers to postpaid. As of March 31, 2014, approximately
96% of industry subscribers remain prepaid, albeit significant growth in the postpaid segment over the
last two years.
The Philippine government liberalized the communications industry in 1993, after a framework was
developed to promote competition in the industry and accelerate the development of the
telecommunications market. Ten (10) operators were granted licenses to provide CMTS services –
Globe, Innove (previously Isla Communications, Inc. or ―Islacom‖), BTI, Connectivity Unlimited
Resources Enterprises (―CURE‖), Digitel Telecommunications Philippines, Inc. (―Digitel‖), Express
Telecom (―Extelcom‖), MultiMedia Telephony, Inc., Next Mobile (―NEXTEL‖), Pilipino Telephone
Corporation (―Piltel‖) and Smart Communications, Inc. (―Smart‖). Nine of the ten operators continued on
to operate commercially except for BTI, which have yet to roll out their CMTS services commercially
When Sun Cellular, Digitel‘s mobile brand, entered the market in 2003, it introduced to the market valuebased unlimited call and text propositions, allowing it to build subscriber scale over time. With the
market‘s preference for these value-based unlimited and bulk call and text services, Globe and Smart
responded by creating a new set of value propositions for their subscribers. Today, with the high level of
mobile penetration, driven in part by the prevalence of multi-SIMming (i.e., individuals having two SIMs),
and the continued shift of consumer preferences to unlimited and bulk offers, the competition in the
mobile market remains intense, albeit in a more rational environment.
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The mobile market continued to grow as shown in the table below. With an estimated cumulative base of
108.52 million SIMs, the mobile industry grew by 5% and reached 110% nominal penetration. Globe
ended 2013 with a SIM base of 38.5 million, with an estimated SIM share of approximately 35.5%, up
from 32.2% in 2012.
Mobile Subscribers (Mn)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1.62
2.68
5.26
10.53
15.17
22.31
32.87
34.61
42.04
54.86
68.03
75.43*
86.15*
93.74*
102.99*
108.52*
Penetration Rates (%)
2.5
3.8
8.6
14.2
19.0
27.3
39.4
40.6
48.3
61.2
74.6
82.3
93.0
98.7
106.4
110.0
Growth Rate
43%
65%
96%
100%
44%
47%
47%
5%
21%
30%
24%
11%
14%
9%
10%
5%
* Estimated end of year figures.
Source: National Telecommunications Commission (Statistical Data 2007), publicly available information and Company
estimates
Since 2000, the mobile communications industry experienced a number of consolidations and
ushered in new entrants, namely:

In 2000, Philippine Long Distance and Telephone Company (―PLDT‖) acquired and consolidated
Smart and Piltel, complementing the former‘s fixed line businesses with the latter‘s wireless
businesses. Subsequently in 2008, PLDT, through Smart, purchased CURE, one of the four
recipients of 3G licenses awarded by the NTC, and has since launched another wireless brand
in the market in Red Mobile, furthering heightening competition in the market at that time.
In October 2011, PLDT also acquired 99.4% of the outstanding common stock of Digitel, which
owns the Sun Cellular brand, thereby allowing it to control over two-thirds of the industry
subscribers. As a condition of PLDT‘s acquisition of Digitel, PLDT returned to the NTC the 3G
license in CURE, which is expected to be re-auctioned in the near-term.

In 2008, San Miguel Corporation (―SMC‖), partnering with Qatar Telecom, bought interests in
Liberty Telecom Holdings, Inc. (―Liberty‖) and announced plans to enter the mobile and
broadband businesses.
In 2010, SMC acquired 100% stake in Bell Telecommunication Philippines, Inc. (―BellTel‖), after
acquiring shares in three companies that own the shares of BellTel. Also in 2010, SMC
purchased a 40% stake in Eastern Telecommunications Philippines, Inc. (―ETPI‖) to expand its
telecommunications services. SMC subsequently gained a majority stake of ETPI in 2011. It
now owns 77.7% of the telecommunications company.
In 2012, NTC has granted BellTel, San Miguel Corporation‘s mobile telephony arm, an extension
to its operating license to provide cellular mobile telephone system (CMTS) service in the
country for another three years.
72

In 2001, Globe acquired Islacom (now Innove). Globe, likewise, acquired approximately 96.5%
of the total debt of BTI, in December 2012. In October 2013, Globe converted a portion of the
debt it holds in BTI into a 38% interest in the latter, based on the Amended Rehabilitation Plan
approved by the Rehabilitation Court in August of the same year. Upon obtaining relevant and
regulatory approvals, Globe would further convert debt into a total 56.6% share of the common
stock of BTI.

In May 2013, ABS-CBN Convergence, Inc. (―ABS-C‖, formerly Multimedia Telephony, Inc.)
announced the launch of its mobile brand, ABS-CBN Mobile. The launch of the new mobile
brand is being supported through a network sharing agreement with Globe, wherein the latter
provides network capacity and coverage to ABS-C on a nationwide basis. ABS-C formally
launched the brand in November 26, 2013.
Today, only the PLDT Group and the Globe Group have built significant bases of mobile subscribers.
Fixed Line Market
The fixed line market expanded by 1% with the number of lines in service estimated at 2.95 million lines
as of December 31, 2013 with PLDT‘s subscriber market share at 70%, followed by Globe (18%) and
BTI (12%).
Fixed Line Voice
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. Rates for local exchange and domestic long distance services are deregulated
and operators are allowed to have metered as well as flat monthly fee tariff plans for the services
provided.
Competition in the fixed line voice market intensified over the past years as the major players, Globe,
BTI, 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.
Fixed Line Data
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.
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Broadband Market
Broadband continues to be a major growth area for the local telecom industry. Total industry broadband
subscribers grew by 10%, from 5.13 million in 2012 to 5.66 million in 2013. The aggressive network rollout of the various operators, the wider availability of affordable prepaid broadband packages, as well as
lower USB internet sticks, PC and tablet prices were the main drivers of subscriber growth. Operators
used both wired and wireless technologies to serve the growing demand for internet connectivity.
While household penetration rates remains low, competition continues to intensify as telecom operators
aim to capture the market by accelerating the rollout of broadband network to provide subscribers with
faster internet connection and introducing more affordable and bundled offerings.
As of March 31, 2014, Globe had 2.2 million subscribers, up by 26% from the same period last year.
The Company‘s subscriber share was estimated at 37%, up from 34% in the same period of 2013. The
combined subscribers of PLDT and Digitel numbered 3.6 million, holding approximately 60% of the
subscribers. Globe and the PLDT Group accounted for about 96% of cumulative subscribers. Wireless
broadband subscribers account for around 76% of the combined broadband subscribers of Globe and
the PLDT Group.
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 70,000 subscribers.
International Long Distance Market
Consistent with global trends where international traffic is migrated to alternative means of
communication, particularly over-the-top (OTT) applications like Skype, among others, total inbound
international long distance (ILD) traffic for the year was lower against last year‘s levels. 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 calling destinations. 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.
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:
The Company‘s suppliers of mobile equipment include Nokia Solutions and Networks (Finland); Ericsson
Radio Systems AB (Sweden), Alcatel-Lucent (France), and Huawei Technologies Co., Ltd. (China). For
transmission and IP equipment, Company has partnered with NEC (Japan), Alcatel-Lucent (France), ECI
Telecom, Ltd. (Israel), Aviat Networks (USA), Cisco (USA). For the Company‘s network modernization
program, Huawei was the selected as the primary partner given its technical expertise and strong track
record of success in international markets. Huawei has likewise committed to establish a Joint
Innovation Center (JIC) that would bring the latest technological developments and help further the
74
Company‘s service innovation initiatives all focused in providing relevant and customizable services for
our various customer segments.
For fixed line and broadband, Globe‘s principal equipment suppliers include Fujitsu Ltd. (Japan), AlcatelLucent Technologies (France), NEC (Japan), AT&T Global (US), British Telecom (UK), Huawei
Technologies Co., Ltd. (China), ZTE Corporation (China). Singapore Telecom (Singapore), and Tellabs
(USA/Singapore).
For the Company‘s IT modernization program, Globe has selected Amdocs, the leading provider of
customer experience systems and services, to improve and upgrade Globe‘s Business Support Systems
(BSS) and enterprise data warehouse. As part of the transformation program, Amdocs is tasked to
manage and consolidate all of Globe‘s legacy systems onto a single Business Support System (BSS)
platform. This will enable the Company to manage its customer relationships better across all it various
product offerings, simplify business processes and shorten the time to deliver bundled and more
innovative products to the market.
Customers
Globe has a large subscriber base across the country. As of March 31, 2014, Globe currently has about
40.7 million mobile subscribers, close to 2.2 million broadband customers, and over 611,000 landline
subscribers.
No single customer and contract accounted for more than 20% of the Company‘s total sales in 2013 and
for the first quarter of 2014.
Transactions with Related Parties
Globe Telecom and Innove, in their regular conduct of business, enter into transactions with their major
stockholders, AC and STI, venturers 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 – AC and STI

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 – net

2013
P
= 201,216
957,232
2012
P
= 126,277
966,037
2011
P
= 36,994
1,136,294
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, 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:
75
(In P
= Thousand)
Technical assistance fee
Maintenance and restoration costs
and other transactions
Software development, supply,
license and support
2013
P
= 163,004
2012
P
= 140,083
2011
P
= 179,014
61,841
64,835
53,996
16,681
12,590
25,999
The 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 P
= Thousand)
Technical assistance fee
Maintenance and restoration costs
and other transactions
Software development, supply,
license and support

2013
P
= 35,775
2012
P
= 45,326
2011
P
= 54,873
20,695
32,372
23,103
4,014
35,268
80,377
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:
2013
2012
2011
P
= 14,761
14,107
P
= 2,143
14,720
P
= 1,718
12,640
(In P
= Thousand)
Subscriber receivables
Service revenues

Globe Telecom reimburses AC for certain operating expenses. The net outstanding liabilities to AC
(included in ―Accounts payable and accrued expenses‖ account in the consolidated statement of
financial position) and the amount of expenses incurred (included in the ―General, selling and
administrative expenses‖ account in the consolidated statements of comprehensive income) are as
follows:
(In P
= Thousand)
General, selling and administrative
expenses
Accounts payable and accrued expenses
2013
P
= 7,768
–
2012
2011
P
= 9,145
P
= 7,878
–
234
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
= 0.98 million and P
= 2.21 million as of December 31, 2013 and 2012,
respectively. Balances related to these transactions (included in ―General, selling and administrative
expenses‖ account in the consolidated statements of comprehensive income) amounted to P
= 3.76
million, P
= 12.24 million for the years ended December 31, 2013, 2012 and 2011,
respectively.
In 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
= 0.54 million, P
= 2.86 million in 2013, 2012 and
76
2011, respectively. The related receivables amounted P
= 3.79 million as of
December 31, 2013 and 2012, respectively.
Transactions with the Globe Group Retirement Plan (GGRP)

In 2008, Globe Telecom, Innove and GXI pooled its plan assets for single administration by the
GGRP, which was created for the management of the retirement fund. The decisions of the GGRP
are made through collective decision of the Board of Trustees.
The plan is funded by contributions as recommended by the independent actuary on the basis of
reasonable actuarial assumptions.
The unfunded status for the pension plan of Globe Group as of December 31, 2013 and 2012
amounted to P
= 1,607.30 million and P
= 843.91 million, respectively.
The fair value of plan assets by each class held by the retirement fund, on a pooled basis, as follows
(in thousands):
Cash and cash equivalents
Investment in fixed income securities
Investment in equity securities
Loans and receivables
Liabilities
Balance at end of year
2013
2012
(In P
= Thousand)
P
= 84,641
P
= 28,333
1,048,421
1,032,279
1,507,287
1,515,993
1,007,686
1,010,980
(994,441)
(995,067)
P
= 2,653,594
P
= 2,592,518
All equity and debt instruments held, except for investment in preferred shares of HALO Group, debt
securities issued by private corporations and long-term negotiable certificates of deposit, have
quoted prices in active market. The remaining plan assets do not have quoted market prices in
active market.
Loans and receivables consist of interest and dividend receivables, receivable on securities sold to
brokers and loan granted by the plan to BHI.
Liabilities pertain to interest and trust fee payables, accrued professional fees and loan granted to
the plan by Globe Telecom.
The plan assets have diverse investments and do not have any concentration risk.
As of December 31, 2013 and 2012, the pension plan assets of the retirement plan include shares of
stock of Globe Telecom with total fair value of P
= 13.02 million, and shares of stock
of
other
related
parties
with
total
fair
value
of
P
= 83.31
million
and
P
= 71.96 million, respectively.
Gains/losses arising from these investments amounted to
P
= 10.97 million in 2013 and 2012, respectively.

In 2008, the Globe Group granted a short-term loan to the GGRP amounting to
P
= 800.00 million with interest at 6.20%. Upon maturity in 2009, the loan was rolled over until
September 2014 with interest at 7.75%. Further, in 2009, the Globe Group granted an additional
loan to the retirement fund amounting to P
= 168.00 million which bears interest at 7.75% and is due
also in September 2014.
The retirement plan utilized the loan to fund its investments in BHI, a domestic corporation organized
to invest in media ventures. BHI has controlling interest in Altimax Broadcasting Co., Inc. (Altimax)
and Broadcast Enterprises and Affiliated Media Inc. (BEAM), respectively.
77

On August 13 and December 21, 2009, the Globe Group granted five-year loans amounting to P
=
250.00 million and 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 to BEAM from
the Globe Group. The P
= 45.00 million loan is fully secured by a chattel mortgage agreement dated
December 21, 2009 between Globe Group and BEAM.

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
= 155.00 million, P
= 250.00 million in
2013, 2012 and 2011, respectively.

On October 1, 2009, the Globe Group entered into a MOA with Altimax 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 in 2013, 2012 and 2011.
Transactions with other related parties
Globe Telecom has money market placements and bank balances, and subscriber receivables (included
in ―Cash and cash equivalents‖ and ―Receivables‖ accounts in the consolidated statements of financial
position, respectively) 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, Bank of the Philippine Islands, Manila Water Company,
Inc., Integrated Microelectronics, Inc., Stream Global Services, Inc., HR Mall Inc., Honda Cars, Inc.,
Isuzu Automotive Dealership, Inc., Accendo Commercial Corp., Affinity Express Philippines, Inc., Alveo
Land Corp., Asian I-Office Properties,Inc., Avida Land Corp., Avida Sales Corporation, Ayala Hotels,
Inc., Ayala Plans, Inc., Ayala Systems Technology, Inc., Cebu Holdings, Inc., Makati Development
Corp., myAyala.com, Inc., North Triangle Depot Commercial Corp., PSI Technologies, Inc., Roxas Land
Corp, Serendra, Inc., Station Square East Commercial Corp., Ten Knots Development, KHI ALI Manila,
Inc., Lagoon Development Corp., Subic Bay Town Center, Inc., Ayala Aviation Corporation, Laguna AAA
Water Corp., Liveit Solution, Inc., Liveit Investments, Ltd., Integreon, Inc., Arvo Commercial Corp.,
Amaia Land Corp., Michigan Power, Philippine Intergrated Energy Solutions, Inc., Southcrest Hotel
Ventures, Inc., Bonifacio Hotels and Crestview E-Office.
The balances with other related parties are recorded under the following accounts:
(In Thousand Pesos)
Service revenues
General, selling and administrative expenses
Subscriber receivables (included in
―Receivables‖ account)
Property and Equipment
Accounts payable and accrued expenses
2013
P
= 166,074
437,793
346,280
2012
P
= 199,392
344,206
345,004
2011
P
= 1,098,168
306,846
288,351
212,391
60,437
72,440
102,454
71,272
50,008
65,694
137,209
32,750
The balances under ―General, selling and administrative expenses‖ and ―Property and equipment‖
accounts consist of expenses incurred on rent, utilities, customer contract services, other miscellaneous
services and purchase of vehicles, respectively.
These related parties are either controlled or significantly influenced by AC.
78
Transactions with Key Management Personnel of the Globe Group
The Globe Group‘s compensation of key management personnel by benefit type are as follows:
(In Thousand Pesos)
Short-term employee benefits
Share-based payments
Post-employment benefits
2013
P
= 63,172
50,000
7,466
P
= 120,638
2012
P
= 123,700
11,502
12,822
P
= 148,024
2011
P
= 75,343
49,338
1,736
P
= 126,417
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 non-interest bearing short-term loans to its key management personnel
amounting to P
= 0.05 million in 2012, included in the ―Prepayments and other current assets‖ in the
consolidated statements of financial position.
Transaction with an associate
On October 1, 2013, Globe Telecom acquired 38% interest in BTI following the conversion of its
unsustainable debt (Tranche B) into 45 million common shares based on the confirmation of the court
dated August 27, 2013 of the Amended Rehabilitation Plan. Globe Telecom will further convert its share
of the Tranche A debt upon certain regulatory approvals. Globe Telecom‘s acquisition of BTI is intended
to increase its current data and DSL businesses using BTI‘s existing platform.
As of March 31, 2014, the equity in BTI was recognized as investment in an associate carried at
acquisition cost valued at nil. BTI remains in a capital deficiency after Tranche B conversion with a
negative book value of common shares at P47.45 per share.
The accumulated unrecognized share in net loss and other comprehensive income as of March 31, 2014
amounted to P488.68 million and P31.88 million, respectively.
79
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
(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
(1)
June 29, 2010
December 24, 2030
Date Issued or Last
Extended
July 22, 2002
July 22, 2002
July 22, 2002
April 30, 2004
Expiration Date
CPCN
(1)
CPCN
(1)
CPCN
(1)
CPCN
(1)
CPCN
(1)
CPCN
CPCN
Type of
License
(1)
CPCN
(1)
CPCN
(1)
CPCN
(1)
CPCN
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 the Company to operate
respective services for a term that will be predicated upon and co-terminus with the Company‘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 Life Device, 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, Tattoo, Globe All you Can,
Ka-Globe Retailer Club, and Muzta!, Ang Wordlwidest, Globe for You, Globe Life, Globe Content, My
Rewards.MyGobe, Tattoo Superstick, Super Unli Call and Text, Tattoo Stick, Tattoo Myfi, Tattoo Torque,
Tattoo Live Without Limits, Globe Life, Enjoy Your Way, I Globe and Heart Device, Tattoo@Home,
Enjoy Your Platinum Your Way, Tattoo DSL, Enjoy Your Globe International Your Way, Enjoy Your
Globe Postpaid Your Way, Enjoy Your Prepaid Your Way, Globe Platinum & Device, Powersurf,
M.Globe, Tattoo Wimax, M2M Solutions, SuperallTxt, Globe Business M2M Solutions, Go Lang Ng Go,
80
Globe Mobile Internet and Globe Life Device, Globe Load and Globe Life Device, Globe My Super Surf
Plan and Device, Tattoo Stylista, Tattoo Explorer, Globe Gcash and Globe Life Device, Globe Mobile
Internet, Tattoo Player, Guaranteed Globe, Guaranteed Happy, Talk2Globe Your Way, My Rewards, My
Globe Logo, Globe Business Infrastructure-as-a-Service, Tattoo Flash, Globe Business Cloud Solutions,
Globe Business Storage-as-a-Service, Guaranteed Globe. Guaranteed Happy Logo, Tattoo 3G Sonic,
Tattoo Sonic, You're On Logo, Globe Plans.
Further, Globe also applied and registered the following brand names: Globe Telecom (Australia,
Taiwan, Japan, Singapore, Macau, Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Great Britain, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg,
Malta, Netherlands, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Korea, Canada,
China, Saudi Arabia), Globe and Globe Life Device (Hong Kong, Taiwan, Singapore, Japan, Austria,
Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Great Britain, Greece,
Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovak
Republic, Slovenia, Spain, Sweden, Macau, Qatar, UAE, USA, Saudi Arabia), Globe GCash (Singapore,
Hong Kong, United Kingdom, Taiwan, Japan, Macau, Austria, Belgium, Cyprus, Czech Republic,
Denmark, Estonia, Finland, France, Germany, Great Britain, Greece, Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovak Republic, Slovenia, Spain,
Sweden, Qatar, Korea, UAE, Saudi Arabia, New Zealand, Ireland, Lebanon, Denmark, Sweden,
Switzerland, Israel), Globe Kababayan (Singapore, Hong Kong, Taiwan, United Kingdom, Australia,
Japan, Macau, USA, Saudi Arabia, Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Great Britain, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg,
Malta, Netherlands, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Malaysia, UAE,
Italy, Korea, Taiwan), Globe Autoload Max (Norway, Singapore, Austria, Belgium, Cyprus, Czech
Republic, Denmark, Estonia, Finland, France, Germany, Great Britain, Greece, Hungary, Ireland, Italy,
Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovak Republic, Slovenia, Spain,
Sweden, Japan, Hong Kong), Globe M-Commerce Hub (Taiwan, Singapore, Korea, Austria, Belgium,
Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Great Britain, Greece, Hungary,
Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovak Republic,
Slovenia, Spain, Sweden, Australia, Macau, Qatar, Malaysia), Muzta, and Smiley With Salakot Device
(Japan, UK, Australia, Kuwait, USA, Saudi Arabia, Bahrain, UAE), Smiley with Salakot (Japan, United
Kingdom, Australia, USA, Saudi Arabia, Bahrain, UAE), and Muzta (Bahrain, UAE, Canada, Qatar,
Saudi Arabia, UAE), GCash Remit and Logo (Austria, Belgium, Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Great Britain, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, Netherlands, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden.
Lebanon, Japan, Switzerland, Macau, Hong Kong, Taiwan, New Zealand, China, Japan, Israel), GCash
Express and Logo (Hong Kong, Singapore, Taiwan, Malaysia), Globe Load (Austria, Belgium, Cyprus,
Czech Republic, Denmark, Estonia, Finland, France, Germany, Great Britain, Greece, Hungary, Ireland,
Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovak Republic, Slovenia,
Spain, Sweden, Switzerland, Macau).
Innove registered "Innove Communications" and Gxchange registered "GXchange," with the Intellectual
Property Office.
Gxchange, Inc. and UTI Pty Ltd. have registered in the Philippines the following:
1.
2.
3.
4.
Person-to-Person Virtual Cash Transfer Transaction Using Mobile Phones;
A Method of Converting Cash into Virtual Cash and Loading it to Mobile Phone Cash Account;
A Method of Cashless, Cardless Purchase Transaction Using Mobile Phones; and
A Method of Converting Virtual Cash into Cash and Deducting it to Mobile Phone Cash Account.
Gxchange, Inc. and UTI Pty Ltd. have likewise registered the following patents in the United States:
1.
2.
Person-to-Person Virtual Cash Transfer Transaction Using Mobile Phones; and
A Method of Converting Virtual Cash into Cash and Deducting it to Mobile Phone Cash Account
81
Gxchange, Inc. and UTI Pty Ltd. have likewise filed the following patent applications in Indonesia,
Singapore and Europe.
1. Person-to-Person Virtual Cash Transfer Transaction Using Mobile Phones;
2. A Method of Converting Cash into Virtual Cash and Loading it to Mobile Phone Cash Account;
3. A Method of Cashless, Cardless Purchase Transaction Using Mobile Phones; and
4. A Method of Converting Virtual Cash into Cash and Deducting it to Mobile Phone Cash Account.
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 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 National Telecommunications Commission
(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 CPCN to operate and maintain an International
Cable Landing Station in Ballesteros, Cagayan Province.
Research and Development
Globe did not incur any research and development costs from 2010 to 2013.
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.
82
Employees
The Globe Group has 6,300 active regular employees as of March 31, 2014.
Breakdown of employees by main category of activity from 2011 to 2013 are as follows:
Employee Type
2013
2012
Rank & File, CBU
2,365
2,596
Supervisory
2,074
1,877
Managerial
1,131
1,034
Executives
417
365
Total *
5,987
5,872
*Includes Globe, Innove, & GXI (excluding Secondees)
2011
2,812
1,714
920
311
5,757
In conformance with the Department of Labor and Employment‘s (DOLE) Collective Bargaining
Agreement (CBA), the Globe Telecom Employees Union-Federation of Free Workers (GTEU-FFW)
remains active to pledge the right of every Ka-Globe to form a collective bargaining unit. All employees
are allowed to participate in CBA and through GTEU-FFW, everyone is informed and made aware of the
mandate during employee orientations.
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 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 have a 5-year collective bargaining agreement for year 2011-2015, a testament to the
strong and peaceful relationship between the two.
Globe Telecom complies with RA 7160 – Special Protection of Children Against Child Abuse,
Exploitation and Discrimination Act and observance of the principles of the Human Rights Act and Child
Labor Law. Benchmarking such regulations generate a happy workplace without presenting any fear of
discrimination or violation towards any employee. The company does not condone the violation of the
rights of indigenous people, nor does the company promote any operational activities that would pose
hazardous risks or damages to children or young employees.
The wonderful world of Globe provides a happy and safe workplace and alongside, implements certain
rules and policies to promote good conduct and behavior. Hence, employees who fail to follow the Globe
Code of Conduct (COC) are given corresponding sanctions. This is to protect the company‘s interests to
be able to consistently create a wonderful world for everyone. The sanctions especially apply to major
offenses related to corruption, extortion, bribery or any form that disrespects the corporate values of the
company. From the beginning, employees will be obliged to declare in writing any involvement or
endeavors that may potentially raise conflict with the company. Failure to do so will subject the employee
for a possible outright dismissal.
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.
83
MARKET FOR ISSUER’S COMMON EQUITY
Dividend Policy
See ―Dividend Policy‖ on pages 58-59 of this Prospectus.
Stock Prices
Globe‘s common shares are listed at the PSE. The closing prices of Globe‘s common shares for the first
quarter of 2014 and the full year of 2013, 2012 and 2011 are as follows:
2013
2012
2011
(in P)
(in P)
(in P)
(in P)
High
Low
High
Low
High
Low
High
Low
1,785
1,605
1,220.00
1,066.00
1,249.00
1,105.00
891.00
660.00
1,740
1,600
1,621.00
1,200.00
1,138.00
1,000.00
900.00
839.00
rd
n/a
n/a
1,649.00
1,451.00
1,235.00
1,070.00
990.00
850.00
th
n/a
n/a
1,780.00
1,590.00
1,160.00
1,078.00
1,133.00
831.00
st
1 Quarter
2
IQ 2014
nd
Quarter
3 Quarter
4 Quarter
The market capitalization of the Company‘s common shares as of May 30, 2014, based on the closing
price of P
= 1,690 per share, was approximately P
= 224.2 billion.
The price of Globe‘s common share as of latest practicable trading date: P1,832 per common share as
of August 6, 2014.
DESCRIPTION OF PROPERTIES
Buildings and Leasehold Improvements
Effective 27 August 2013, Globe transferred its Head Office to The Globe Tower, 32
Avenue, Bonifacio Global City, Taguig from Globe Telecom Plaza, Mandaluyong City.
nd
Street corner 7
th
Globe also owns several floors of Pioneer Highlands Towers 1 and 2, located at Pioneer Street in
Mandaluyong City. In addition, the Company also owns host exchanges in the following areas: Bacoor,
Batangas, Ermita, Iligan, Makati, Mandaluyong, Marikina, Cubao-Aurora, among others.
The Company leases office spaces along Sen. Gil Puyat Avenue, EDSA and Ermita for its technical,
administrative and logistics offices and host exchange, respectively. It also leases the space for most of
its Globe Stores, as well as the Company‘s base stations and cell sites scattered 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 continues to expand its network, 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 2013 Audited
Financial Statements)
Telecommunications Equipment
As of 31 December 2013, the Company has mobile switching centers, 2G, 3G and 4G mobile switching
systems, transit switching centers and home location registers located in key areas nationwide. It also
84
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. As of December 31, 2013, the Company has over 1.5 million installed fixed
voice 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 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 transmission. In November 2009, Globe completed work on
nd
its 2 FOBN which is expected to provide additional capacity and improve redundancy to its existing
FOBN.
Last November 2011, Globe announced a landmark mobile network modernization program that
significantly improve network quality and customer experience, increase capacity, drive down costs, as
well as prepare the network to meet the needs of customers today and in the future. Given the growing
demand for bandwidth-heavy services, this modernization program aims to bring significant
improvements to network capacity leading to improved reliability, ease of access and pervasive
coverage. This modernization includes upgrading to a more efficient HSPA+ and LTE-ready network by
deploying single-cabinet base stations with more efficient energy and site footprint, and Software
Defined Radio (SDR) base stations that support multiple technologies and allows for flexible and quick
capacity expansion for future need. The transport facilities will also be upgraded to a more resilient, allIP architecture to improve scalability and traffic efficiency through increased fiberization of access and
fringe core network and deployment of 40/100Gbps Dense Wavelength Division Multiplex (DWDM)
transport backbone.
In 2013, Globe completed the first phase of the network modernization and is now focused on the
fiberization of the remaining balance of the targeted sites for improved network scalability and traffic
handling capacity. In addition, Globe is building more sites to boost capacity and fill in identified gaps to
improve network coverage and performance.
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;
85
 SJC – Southeast Asia Japan Cable System – connects Singapore, Brunei, Hong Kong, China
Mainland, Japan and the Philippines, with options to extend to
Thailand
 TGN-IA – Tata Global Network – Intra Asia cable system - connects the Philippines to Japan,
Hong Kong, Vietnam, and Singapore with onward connectivity via the TGN-Pacific network to
the United States; and
The Company also has an international cable landing station located in Nasugbu, Batangas that directly
accesses 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), and Fiber Optic Link Around the Globe (FLAG), 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 TGN-Pacific network to Guam and the United
States.
On 1 October 2013, the Southeast Asia-Japan Cable (SJC) System was formally launched where Globe
is the exclusive landing party in the Philippines. The SJC System is one of the highest capacity systems
in the world (supporting an initial design capacity of 28 terabits per second, the fastest speed an
undersea cable system can provide). This enhances the Company‘s global link to support businesses
and consumers‘ increasing demand for high-speed internet and connectivity. Globe joins some of the
biggest names in the industry including Brunei International Gateway Sendirian Berhad (BIG), Google,
SingTel, KDDI, PT Telekomunikasi Indonesia International (Telin), China Mobile, China Telecom, China
Telecom Global Limited (an affiliate of China Telecom), Donghwa Telecom Co., Ltd., and TOT of
Thailand, in this consortium.
CHANGES IN CONTROL
Globe is not aware of the existence of any agreement that may result in a change in control of Globe.
GENERAL CORPORATE INFORMATION
Corporate Governance
Globe Telecom commits to strengthening the structure and processes of corporate governance in
meeting the challenges brought by global and national state of affairs. Integrity, accountability, and
transparency are the three principles that continuously guide the company in achieving its mission,
vision and goals. The fruit of this effort has been evident in Globe Telecom‘s strong foundation.
Among the legal documents that serve as the company‘s operational framework include the Company‘s
Articles of Incorporation and By-Laws and Manual of Corporate Governance. The Company‘s Articles of
Incorporation and By-Laws maintain the basic structure of corporate governance while the Manual of
Corporate Governance supplements it. The Manual of Corporate Governance in particular was updated
in 2010 to conform with the Securities and Exchange Commission Memorandum Circular No. 6, Series
of 2009 (Revised Code of Corporate Governance). The Manual undergoes regular review in compliance
with government regulations.
Moreover, documents that balance control and governance at Globe Telecom include Code of Conduct;
Conflict of Interest; and Whistle Blower Policy. Formal policies on Unethical, Corrupt and Other
Prohibited Practices were put in effect to guard against unbecoming activities and serve as a guide to
86
work performance, dealings with employees, customers and suppliers, and managing assets, records
and information including the proper reporting, handling of complaints and fraudulent reports and
whistleblowers. These policies cover employees, management and members of the Board. These
documents are the key to the balance of control and governance at Globe Telecom.
Board of Directors
Key Roles
The key roles of the Board of Directors are:




Act as the supreme authority in matters of governance wherein it establishes vision, mission and
strategic direction of the company
Monitor overall corporate performance as well as ensure transparency, accountability and
fairness to protect long-term interests of its stakeholders
Oversee the responsibility for risk management wherein adequacy of internal control
mechanisms, reliability of financial reporting and compliance with applicable laws are ensured
Approve corporate operation and capital budgets, major acquisition and disposal of assets,
major investments, and changes in authority and approval limits.
Board Composition
Eleven (11) board members are elected at the Annual Stockholders Meeting (ASM). Elected board
members shall hold office for the ensuing year until the next ASM. The President/ CEO is elected as
executive director while the other members are elected as non-executive directors. The non- executives
are not involved in the day to day management of business.
The Board of Directors also includes three independent directors. These independent directors, as
defined by the Company, are independent from management and major/substantial shareholders and
are free from any business or relationship that could materially interfere in their exercise of independent
judgment in carrying out their responsibilities as a director.
The people that comprise the Board of Directors are highly qualified and have the ability to thoroughly
examine issues and matters that affect the company. Prior to election, the Nomination Committee,
presided by an independent director, reviews the qualification of each member. To execute their role
well, training on corporate governance is given prior to assuming office.
As of April 8, 2014, the Board is comprised of the following members:
Name
Jaime Augusto Zobel de Ayala
Gerardo C. Ablaza, Jr.
Mark Chong Chin Kok
Romeo L. Bernardo
Ernest L. Cu
Delfin L Lazaro
Rex Ma. A. Mendoza*
Guillermo D. Luchangco*
Manuel A. Pacis*
Tay Soo Meng
Fernando Zobel de Ayala
Position
Chairman
Co-Vice Chairman
Co-Vice Chairman
Director
Director, President and CEO
Director
Director
Director
Director
Director
Director
* Independent Director
In compliance with the Revised Code of Corporate Governance, the Board appoints three highly
qualified independent directors for effective weigh-in on Board discussion and decisions. An independent
87
director as defined by Globe is a person independent from management and major/substantial
shareholders and free from any business or other relationship which could materially interfere with his
exercise of independent judgment in carrying out responsibilities as a director.
The board members have enough expertise, professional experiences and background to enable
thorough examination and deliberation of the issues and matters affecting the Company. Moreover, for
the members to fully execute their responsibilities, trainings on corporate governance are given prior to
assuming office.
The Nomination Committee, presided by an independent director, reviews the qualifications of all board
members. The profiles of the directors are found in the ―Board of Directors‖ section of this Annual
Report.
Board Remuneration
The Board member‘s remuneration is set at an optimum level to attract and retain high caliber directors
to continue delivering their services effectively. In accordance with the Company‘s By-Laws, the Board
members shall receive, pursuant to a resolution of the stockholders, fees and other compensation for
their services as directors and members of committees of the Board of Directors. As approved by the
shareholders during the Annual Stockholders‘ Meeting held on April 1, 2003, the Board members shall
receive a per diem of ₱100,000 per board or committee meeting. During the Annual Stockholders‘
Meeting held on April 8, 2014, the shareholders approved the increase of the per diem for Board
members to P200,000 per board meeting, while retaining the per diem for committee meetings at
P100,000. The remuneration is a form of recognition for the responsibilities of the Board for delivering
high standard services for continuous growth of the Company.
Board Performance
The shareholders‘ meeting, held annually, serves as an opportunity for shareholders to raise questions
and clarify issues relevant to the Company. The Board members, President/CEO, together with the
external auditors, are in attendance. Prior to meeting, the Board receives board documents. These
documents contain reports on the Company‘s strategic, operational, and financial performance, and
other regulatory matters. The corporate secretary (1) acts as adviser to directors regarding their
responsibilities and obligations and (2) oversees the flow of information prior to meetings. At the
meeting, the Board may also clarify with management regarding the matters/items submitted for
consideration.
A self-assessment is also conducted annually to ensure effectiveness of processes and to identify areas
of improvement. An executive session also takes place every last meeting of the year to evaluate and
discuss matters concerning the board. This includes an evaluation of the Company‘s performance and
its management team.
88
In 2013, a total of seven (7) meetings were held by the Board of Directors and one (1) Annual
Stockholders' Meeting. The attendance of each board member is enumerated below:
Board Member
1
Hui Weng Cheong
2
Mark Chong Chin Kok
Delfin L. Lazaro
Tay Soo Meng
Ernest L. Cu
Romeo L. Bernardo
Manuel A. Pacis
Xavier P. Loinaz
Guillermo D. Luchangco
Meetings
Attended
6
2012
Meetings
held
7
7
7
7
6
7
5
7
7
7
6
7
7
7
7
7
7
7
7
7
7
Percent
Present
86.0%
100.0%
100.0%
100.0%
86.0%
100.0%
71.0%
100.0%
100.0%
100.0%
86.0%
Meetings
Attended
7
6
0
5
7
6
7
6
7
7
7
7
2013
Meetings
held
7
Percent
Present
100.0%
7
2
5
7
7
7
7
7
7
7
7
85.7%
0.0%
100.0%
100.0%
85.7%
100.0%
85.7%
100.0%
100.0%
100.0%
100.0%
1
Mr. Hui Weng Cheong served as Director until 16 April 2013.
Mr. Mark Chong Chin Kok was elected Director on 16 April 2013
2
Board Committees
The Board may create committees as it deems necessary, in accordance with the Company By-Laws
and Manual of Corporate Governance, to support it in its performance of its functions and to aid in
corporate governance. Currently, there are five (5) board committees.
All the committees have their own charters that are aligned with the objectives of each committee.
Board Committee
Executive
Role
Provides guidance to management in (a)
formulating the basic strategies for
achieving targets set by the Board; (b)
putting in place the infrastructure for
control and operational risk management
systems that assess risks on an
integrated cross-functional approach, and
review and assess the adequacy of Globe
Telecom‘s operational risk management
process; (c) considering and/or
completing mergers, acquisitions and
strategic investments; and (d)
undertaking strategic projects and
significant transformation initiatives.
Members
Chairman: Jaime Augusto Zobel De
Ayala
Co-Vice Chairman: Mark Chong
Chin Kok
Co- Vice Chairman: Gerardo C.
Ablaza, Jr.
Members: Ernest L. Cu and Tay
Soo Meng
89
Audit
Compensation and
Remuneration
It supports corporate governance of the
Company by fulfilling its oversight
responsibility relating to:

the integrity of the financial statements
and the financial reporting process
and principles;

internal controls;

the qualifications, independence,
remuneration and performance of the
independent auditors;

staffing, focus, scope, performance,
and effectiveness of the internal audit
function;

risk management; and compliance
with legal, regulatory, and corporate
governance requirements
Assists the Board of Directors in
governance matters relating to
compensation and benefits of Directors,
Key Officers and personnel of the
Corporation.
Nomination
Ensures unbiased nomination of directors
and officers.
Finance
Oversees the Corporation‘s financial
policy and strategy, including capital
structure, dividend policy, acquisitions
and divestments, treasury activities, tax
strategy and compliance, retirement fund
contributions, and financing proposal that
may be brought to the Board for approval.
Chairman - Manuel A. Pacis
Members: Romeo L. Bernardo
and Tay Soo Meng (Alternate:
Chor Khee Yang)
Chairman – Rex Ma. A. Mendoza
Members: Romeo L. Bernardo,
Gerardo C. Ablaza, Mark Chong
Chin Kok (Alternate: Aileen Tan)
Chairman – Rex Ma. A. Mendoza
Mark Chong Chin Kok, Gerardo C.
Ablaza, Jr.
Chairman:
Delfin
L.
Lazaro
(Alternate: Delfin C. Gonzalez, Jr.)
Fernando Zobel de Ayala, Tay Soo
Meng (Alternate: Allan Wong)
Committee Meeting
The Executive Committee met eleven (11) times, the Audit Committee met four (4) times, the
Nomination Committee met one (1) time, the Compensation & Remuneration Committee met two (2)
times and the Finance Committee met four (4) times. The Attendance of the members of these
Committees is duly recorded, as follows:
Board Committee
Executive
Members
Jaime Augusto Zobel De
Ayala
1
Hui Weng Cheong
2
Mark Chong Chin Kok
Ernest L. Cu
Tay Soo Meng
Manuel A. Pacis
Present
Absent
11
-
6
11
11
9
4
4
1
2
-
Romeo L. Bernardo
Tay Soo Meng
4
4
-
Compensation and
Remuneration
2
-
2
-
Mark Chong Chin Kok
2
-
Nomination
Xavier P. Loinaz
1
-
Audit
90
Finance
1
-
Mark Chong Chin Kok
Delfin L. Lazaro
1
1
4
-
4
-
Tay Soo Meng
4
-
1
Mr. Hui Weng Cheong served as ExCom member until 16 April 2013.
2
Mr. Mark Chong Chin Kok was elected to the ExCom on 16 April 2013.
Management Commitments
Globe Telecom management continually commits to high standards of disclosure, transparency and
accountability. The management established the sustainability policy and reviews its adequacy at the
highest level periodically and allocated resources to ensure effective implementation. The practice of
sustainability reporting was implemented as a means to provide fair, accurate and meaningful
assessment of its overall performance on triple bottom line (viz. Economic, Environment and Social)
responsibility to its stakeholders including investors.
As for the investor community, the Company practices regular disclosure of financial results. Quarterly
financial results are immediately disclosed after the approval by the Board to PSE (Philippine Stock
Exchange) and Securities and Exchange Commission (SEC). Quarterly and yearend financial
statements and detailed management‘s discussion and analysis are filed within forty five (45) and one
hundred and five (105) calendar days respectively from the end of financial period. The Company‘s
financial reporting disclosures are in compliance with the PSE and SEC requisites. These reports are
made available to the analysts after disclosure and posting on the Company‘s website.
Any market sensitive information such as dividend declaration is also disclosed to the SEC and PSE and
then released through various modes of communication.
FUNCTIONS OF AUDIT
Audit Committee
The Audit Committee‘s roles and responsibilities are defined clearly in the Audit Committee Charter
approved by the Board. The Committee supports the corporate governance of the Company by fulfilling
its oversight responsibility relating to: a) the integrity of the financial statements and the financial
reporting process and principles; b) internal controls; c) the qualifications, independence, remuneration
and performance of the independent auditors; d) staffing, focus, scope, performance and effectiveness
of the internal audit function; e) risk management; and f) compliance with legal, regulatory, and corporate
governance requirements. Management however has primary responsibility for financial statements and
reporting process, internal controls, legal and regulatory compliance, and risk management.
The Committee is composed of three members, one of whom is an independent director. The
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, conducts, 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 Audit Committee also approves the work plan of the Globe Internal Control Division, 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 and CEO, Chief Financial Officer,
91
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 Finance Officer, and those released to the public and/or submitted to the 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 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.
•
The Committee provides oversight of 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 Board.
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 most recent
Charter review was done in August 2013 with no significant changes therein.
The Committee conducts an annual assessment of its performance to benchmark its practices against
the expectations set out in the approved Charter, in compliance with the Manual of Corporate
Governance and with SEC Memo Circular No.4 (Series of 2012). The results of the self-assessment
and any ensuing action plans formulated to improve the Committee‘s performance are reported to the
Board.
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. Globe Internal Audit (IA) assists and supports Management in continuously instilling and
nurturing Operational Risk and Control Self-Assessment (ORCA) environment at Globe Telecom through
facilitation of self-assessment exercises among various business groups. The Audit Committee regards
its relationship with Internal Audit as having a vital role in supporting the Committee in the effective
discharge of its oversight role and responsibilities.
92
Globe IA 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.
Internal Audit maintains, reviews and assesses the adequacy of its Charter annually to ensure
conformance with the International Standards for the Professional Practice of Internal Auditing (the
Standards) and appropriateness for enabling good corporate governance. Any amendments to the
Charter are submitted to the Audit Committee for approval.
Globe IA adopts a risk-based audit approach in developing its annual work plan, re-assessed 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 adequately 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 IA governs its internal audit activities in conformance with the Institute of Internal Auditor‘s Code
of Ethics, and the Company‘s Code of Conduct. To ensure consistent conformance with the Standards,
nd
the group subjected its activities to its 2 external Quality Assurance Review (QAR) which resulted in a
―Generally Conforms‖ rating, the highest rating that can be achieved in the QAR process.
Geared towards excellence, Globe Internal Audit provides for continuing professional and personal
development for all auditors through its Learning Ladder Framework to equip them in the conduct of
reviews, with focus on acquiring expertise on Globe Telecom‘s business processes, network and IT
systems, internal controls, new accounting and auditing standards, and regulatory updates. In addition,
the group has been actively participating in Ayala Group and SingTel Internal Audit Network that aims to
benchmark and share leading internal audit practices including information on process development,
methodology, and knowledge to develop a network of world class, multi-skilled, internal audit
professionals.
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. The most recent tender bid process was conducted in Q4/2012. Also, the
Company conducts on an annual basis an independent auditor‘s performance appraisal. From the
results, the Audit Committee evaluates and proposes 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.
93
SyCip, Gorres, Velayo & Company (SGV & Co.), a member firm of Ernst and Young (EY), 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 next rotation is for the 2014 audit.
There were no disagreements with the Company‘s independent auditors on any matter of accounting
principles or practices, financial statement disclosures, or auditing scope or procedures.
Fees approved in connection with the audit and audit-related services rendered by SGV & Co. and other
EY Firms, pursuant to the regulatory and statutory requirements for the years ended 31 December 2013
and 2012 both amounted to P16.04 million, inclusive of 10% out-of-pocket expenses (OPE). In addition
to performing the audit of Globe Group‘s financial statements, SGV & Co. and other EY Firms were also
selected, in accordance with established procurement policies, to provide other services in 2013 and
2012.
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 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 all non-audit services rendered by SGV & Co. and EY
India and the corresponding fees, and concluded that these do not impair their independence. SGV &
Co. has confirmed to the Audit Committee that the non-audit services rendered by them and EY India
are services that are allowed to be provided to an audit client under existing regulations and the Code of
Ethics of Professional Accountants in the Philippines and does not conflict with their role as external
auditors of the Company.
The aggregate fees billed by SGV & Co. and other EY Firms are shown below (with comparative figures
for 2012):
(Amount in millions of Pesos)
2013
2012
Audit and Audit-Related Fees
SGV Audit Fee
P
Non-Audit Fees
EY India
SGV
Total
16.04
P
32.58
15.89
P
48.47
64.51
16.04
14.81
1.98
P
16.80
32.84
*Excludes 2013 audit fees from GTI HK of P398K (P508K in 2012) audit services performed by EY HK, GT EU of
P303K and GT UK of P457K), audit services performed by Wellden and Turnbull LLP.
Audit and Audit-Related 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 2013 and 2012. 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. The 2013 non-audit fees include charges on review of data migration, user acceptance
and integration testing related to the on-going transformation projects incurred by the Company during
its modernization period. This also includes special projects, trainings and seminars rendered by the
SGV & Co and its affiliates.
94
The fees presented above include out-of-pocket expenses incidental to the Independent Auditors
services.
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 Telecom‘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 to those with
access to such material non-public information. Also, all key officers are required to submit a report on
their trades to the compliance officer, for submission to the SEC in accordance with the Securities
Regulation Code.
OWNERSHIP STRUCTURE
Stockholders
Ayala Corp.
SingTel
Asiacom
Public *
Total
Common Shares
% of
Common
40,328,090
62,646,487
29,466,776
132,676,628
30.4%
47.2%
0.0%
22.2%
100.0%
Preferred
Shares
158,515,021
158,515,021
% of
Preferred
Shares
0.0%
0.0%
100.0%
0.0%
100.0%
Total
40,328,090
62,646,487
158,515,021
29,466,776
291,191,649
% of
Total
13.9%
21.5%
54.4%
10.1%
100.0%
*Includes shares held by Globe directors, officers and employees through ESOP (Executive Stock Option Plan) as of March 31,
2014
Globe Telecom regularly discloses the top 100 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.
As of June 30, 2014, public float excluding shares held by Globe directors, officers and employees
through the Executive Stock Option Plan was at 22.21%.
ENTERPRISE RISK MANAGEMENT
Globe Telecom believes that effective enterprise risk management practices are crucial in the success of
the company. Hence, the company ensures that risk management remains a core capability and an
integral part of all business units and activities of the company.
Globe Telecom's objectives in managing risk include:





Aligning and embedding risk and opportunity management into the culture and strategic decision
making of the organization;
Anticipating and responding to changing social, environmental and regulatory conditions and
emerging changes in technology;
Managing risk in accordance with best practices and demonstrating due diligence in decision
making;
Promoting sound management practices, enhance the quality of decision making, and protect
governance and accountability principles, and;
Balancing the cost of managing risk with the anticipated benefits
95
Risk Management Approach
An enterprise wide assessment of risks is performed by senior management and key leaders as part of
Globe Telecom‘s annual planning cycle. This assessment focuses on identifying the (1) key risks that
threatens Globe Telecom‘s achievement of its business objectives at corporate and business unit level
and (2) specific plans in the mitigation of such risks.
The identified risks are managed and prioritized based on the degree of impact to the business activities
and its likelihood of occurrence. Actions and strategies to address the risks are continuously being
developed, updated, improved, and reviewed for effectiveness. The monitoring of the actions taken to
minimize risk undergoes a two dimensional view which include the monitoring made by the Business unit
and Functional Group Level Leaders and the monitoring made by the senior management . The
business unit and group level leaders monitor the operational, legal, and project risks while senior
management monitors enterprise level risks such as strategic risks, major programme risks, and
regulatory risks.
In Q4 2013, Globe rolled-out the Operational Risk Management (ORM) program, a cyclical, coordinated
end-to-end approach to identify, assess, treat, monitor and communicate operational risks for effective &
informed business decisions. Management believes that ORM is an essential foundation for a strong
Enterprise Risk Management (ERM) process as it reinforces the lines of defense against key operational
risks.
One of the risks the Company faces is the threat of natural calamities. In order to develop disaster proof
telecom services, the company is committed to a network transformation plan wherein advanced
equipment is continuously being deployed on several sites. Aside from this, Globe prepares an amplified
Business Continuity Management wherein continuity of services and operations is ensured despite
natural calamities and disasters.
Roles and Responsibilities
The Board of Directors, as supported by the Executive Committee (ExCom) and Audit Committee, are
responsible for the Company‘s Risk Management and the approval of risk management policies and
framework. ExCom, in particular, handles the non-financial risk such as strategic operation, human
capital and regulatory, while the Audit Committee handles financial risks.
The Chief Finance Officer and concurrent Chief Risk Officer (CRO) supports the President in acting as
risk executive. Their role is to ensure that (1) risk management processes and activities are embedded
in the normal policy business cycles and operational decisions, (2) the responsibilities for managing
specific risk are clear, (3) the level of risk accepted by the company is appropriate, and (4) an effective
control environment exists for the company as a whole.
In addition, the Enterprise Risk Management Services Division (ERMSD) supports the CRO in
undertaking his role. It assists all levels of the organization in achieving key objectives through a
systematic approach of evaluating and improving effectiveness of risk management.
The CRO reports semi-annually to the Board through the Audit Committee, Globe Telecom‘s critical risks
and key mitigation strategies.
The Company believes that risks could be managed well by the employees closest to the process.
Thus, Globe Telecom ensures that risk owners at the senior executive level are identified and made
accountable for specific risks.
96
Business Continuity Management
In the effort to mitigate the risk of business disruption and improve the capabilities to prepare for,
respond to and recover immediately from any incident that could compromise the safety of its people
and disrupt service, Globe sustains its enterprise-wide Business Continuity Management (BCM)
Program. BCM, an integral component of the Company‘s ERM program, is internationally certified to BS
(British Standards) 25999 in 2011 and 2012, and has recently been aligned to and certified on the new
international business continuity standard, ISO 22301. The program remains to have top management
support, organizational structure, framework and funding in its maintenance and implementation. While
there is no assurance that severe disruptive events will not occur, BCM ensures readiness when it
comes to responding and recovering from any incident of interruptions.
Globe has expanded the scope of its BCM implementation to cover more mission-critical sites across the
archipelago. The scope expansion translates to the enhanced BCM capabilities resulting from controls
establishment and consistent program implementation, documented procedures that ensure discipline
and best practices, and improved preparedness to respond to and recover from incidents.
Globe Telecom‘s BCM is comprehensive. It encompasses main elements such as employee safety,
service continuity and immediate return to normalcy. Ensuring employee safety includes tasks such as
Search and Rescue, Sheltering, Mass Care and Security not only of the employees but of their families.
For service continuity, deployment of critical resources in strategic locations has become a standard
strategy which is executed prior to the onslaught of incoming typhoon to ensure their availability and
faster recovery and continuation of network services after the typhoon has passed. Community Disaster
Responses are also on hand for relief operations and assistance in terms of communication to keep the
affected communities connected.
To ensure uniformity of response to the various kinds of threats such as natural calamities and crashing
of hardware and software system, Globe established and maintains an Incident Management Plan (IMP)
and formed Business Continuity Task Forces (BCTF), such as Emergency Response Team (ERT), in all
critical sites. The IMP undergoes regular monitoring, testing, and improvement and the BCTF members
undergo training to improve skills and capabilities in responding to emergencies. Globe recognizes the
importance of a well maintained and implemented IMP, wherein quick recovery from anticipated and not
anticipated disruptive events is guaranteed.
For specific threats to sites, such as typhoons, floods and earthquakes, Globe developed and regularly
tests its Site Disaster Management Plan (SDMP) to ensure readiness of the network sites in times of
disasters. With such plan prepared and fully functioning, it enabled faster response during the onslaught
of calamities in 2013, such typhoons Santi and Vinta that hit North Luzon, and the 7.2 magnitude
earthquake that hit Bohol.
But no typhoon has challenged our readiness and tested but proved our organizational resilience the
way Super Typhoon Yolanda did.
Globe prepared for and responded to Yolanda on the basis of documented plans and the commitment,
malasakit and resilience of the organization. Yolanda, which has become the strongest typhoon to ever
land Philippine territory with majority in the Visayas region, affected a number of Globe employees and
their families, impaired and damaged mobile and fixed networks of the badly hit areas, and destroyed
the communities that Globe serves. Fortunately, Globe prepared for Yolanda days before it made
landfall, and was able to execute good restoration strategies through its prepared BCM practices and
dedicated teams, which restored communication lines in the areas and for citizens most in need. Just
like in previous calamities such as the Habagat of 2012 and 2013, Globe Telecom's search and rescue
teams accounted for and provided immediate relief and assistance to affected employees and their
families, as well as some of Globe Telecom's partners. The documented BCM arrangements with critical
vendors were also invoked and successfully implemented which provided immediate response to
required resources and faster restoration of the network services. Internal and external communications
were also in place providing 24/7 monitoring and regular updates to Globe Telecom‘s top management,
97
employees, customers, the media, government agencies and all other stakeholders. The Corporate
Social Responsibility team was also quick to respond by providing Libreng Tawag, Libreng Charging,
and various other relief efforts.
Typhoon Yolanda has provided many lessons and learning experience for the BCM team. As a neverending commitment, Globe will continue improving and enhancing the BCM Program to be able to
respond to any strong calamities that might transpire in the future.
98
LEGAL PROCEEDINGS
A. On 23 July 2009, the NTC issued NTC Memorandum Circular (MC) No. 05-07-2009 (Guidelines on
Unit of Billing of Mobile Voice Service). The MC provides that the maximum unit of billing for the
cellular mobile telephone service (CMTS) whether postpaid or prepaid shall be six (6) seconds per
pulse. The rate for the first two (2) pulses, or equivalent if lower period per pulse is used, may be
higher than the succeeding pulses to recover the cost of the call set-up. Subscribers may still opt to
be billed on a one (1) minute per pulse basis or to subscribe to unlimited service offerings or any
service offerings if they actively and knowingly enroll in the scheme. In compliance with NTC MC
05-07-2009, Globe refreshed and offered to the general public its existing per-second rates that, it
bears emphasizing, comply with the NTC Memorandum Circular. Globe made per second charging
for Globe-Globe/TM-TM/Globe available for Globe Subscribers dialing prefix 232 (GLOBE) OR 803
plus 10-digit TM or Globe number for TM subscribers. The NTC, however, contends that Globe‘s
offering does not comply with the circular and with the NTC‘s Order of 7 December 2009 which
imposed a three-tiered rate structure with a mandated flag-down of P3.00, a rate of P0.4375 for the
13th to the 160th second of the first minute and P0.65 for every 6-second pulse thereafter. On 9
December 2009, the NTC issued a Cease and Desist Order requiring the carriers to refrain from
charging under the previous billing system or regime and refund consumers.
Globe maintains that the Order of the NTC of 7 December 2009 and the Cease and Desist Order are
void as being without basis in fact and law and in violation of Globe‘s rights to due process. Globe,
Smart, Sun and CURE all filed petitions before the Court of Appeals seeking the nullification of the
questioned orders of the NTC. On 18 February 2010, the Court of Appeals issued a Temporary
Restraining Order preventing the NTC from enforcing the disputed Order.
On 25 May 2010, the CA issued a writ of preliminary injunction directing the NTC to cease and
desist from enforcing their assailed Order/s. On 28 December 2010, the CA rendered a Decision
declaring the questioned decisions invalid for being violative of the Petitioners‘ right to due process,
among others.
The Petitioners and the NTC filed their respective Motions for Partial
Reconsideration. The motions were DENIED by the CA in an Order dated 19 January 2012. Due to
lack of material time, the NTC and the Petitioners seasonably filed their respective Motions for
Extension of Time to File Petition for Review with the Supreme Court. The Movants are expected to
file their respective petitions within the month of March 2012.
Globe believes that its legal position is strong and that its offering is compliant with the NTC‘s
Memorandum Circular 05-07-2009, and therefore believes that it would not be obligated to make a
refund to its subscribers. If, however, Globe would be held as not being in compliance with the
circular, Globe may be contingently liable to refund to any complaining subscribers any charges it
may have collected in excess of what it could have charged under the NTC‘s disputed Order of 7
December 2009, if indeed it is proven by any complaining party that Globe charged more with its per
second scheme than it could have under the NTC‘s 6-second pulse billing scheme stated in the
disputed Order. Management has no estimate of what amount this could be at this time.
B. On 22 May 2006, Innove received a copy of the Complaint of Subic Telecom Company (―Subictel‖),
Inc., a subsidiary of PLDT, seeking an injunction to stop the Subic Bay Metropolitan Authority and
Innove from taking any actions to implement the Certificate of Public Convenience and Necessity
granted by SBMA to Innove. Subictel claimed that the grant of a CPCN allowing Innove to offer
certain telecommunications services within the Subic Bay Freeport Zone would violate the Joint
Venture Agreement (―JVA‖) between PLDT and SBMA. The Supreme Court ordered the
reinstatement of the case and has forwarded it to the NTC-Olongapo for trial.
C. PLDT and its affiliate, Bonifacio Communications Corporation (BCC) and Innove and Globe are in
litigation over the right of Innove to render services and build telecommunications infrastructure in
the Bonifacio Global City. In the case filed by Innove before the NTC against BCC, PLDT and the
Fort Bonifacio Development Corporation (FBDC), the NTC has issued a Cease and Desist Order
99
preventing BCC from performing further acts to interfere with Innove‘s installations in the Bonifacio
Global City.
In the case filed by PLDT against the NTC in Branch 96 of the Regional Trial Court (RTC) of Quezon
City, where PLDT sought to obtain an injunction to prevent the NTC from hearing the case filed by
Innove, the RTC denied the prayer for a preliminary injunction and the case has been set for further
hearings. PLDT has filed a Motion for Reconsideration and Globe has intervened in this case. In a
resolution dated 28 October 2008, the RTC QC denied BCC‘s motion for the issuance of a
temporary restraining order (TRO). The case is still pending with the QC RTC.
In the case filed by BCC against FBDC, Globe Telecom and Innove, Bonifacio Communications
Corp. before the Regional Trial Court of Pasig, which case sought to enjoin Innove from making any
further installations in the BGC and claimed damages from all the parties for the breach of the
exclusivity of BCC in the area, the court did not issue a Temporary Restraining Order and has
instead scheduled several hearings on the case. In a resolution dated 28 October 2008, the RTC QC
denied BCC‘s motion for the issuance of a temporary restraining order (TRO). The case is still
pending with the RTC Pasig.
On 11 November 2008, Bonifacio Communications Corp. (BCC) filed a criminal complaint against
the officers of Innove Communications Inc., the Fort Bonifacio Development Corporation (FBDC)
and Innove contractor Avecs Corporation for malicious mischief and theft arising out of Innove‘s
disconnection of BCC‘s duct at the Net Square buildings. The accused officers filed their 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 with the Court of Appeals a Petition for Certiorari and
Prohibition against NTC, et al. seeking to annul the Orders of the NTC dated 28 October 2008
directing BCC, PLDT and FBDC to comply with the provisions of NTC MC 05-05-02 and the CEASE
AND DESIST from performing further acts that will prevent Innove from implementing and providing
telecommunications services in the Fort Bonifacio Global City pursuant to the authorization granted
by the NTC. BCC and PLDT anchor their petition on the grounds that: 1) the NTC has no jurisdiction
over BCC it being a non-telecommunications entity; 2) the NTC violated BCC and PLDT‘s right to
due process; and 3) there was no urgency or emergency for the issuance of the cease and desist
order. The case is pending with the court of appeals.
On April 25, 2011, Innove Communications, filed its comment on the case filed by PLDT that seeks
to ban all Globe services from the Bonifacio Global City before the CA‘s Tenth Division. In its
comment, Globe argued that it is in the public‘s best interest that open access and free competition
among telecom operators be allowed at the Bonifacio Global City.
On August 16, 2011, the Ninth Division of the CA ruled that PLDT‘s case against Innove and the
National Telecommunications Commission (NTC) lacked merit, and thus denied the petition and
DISMISSED the case. PLDT and its co-petitioner, BCC file their motion for reconsideration. The
same is still pending resolution.
D. On the Text Refund Case (NTC Adm. Case No. 2011-098). On May 30, 2008, the NTC issued
Memorandum Circular No. 02-05-2008 entitled: ―Value Added Services‖ classifying text messaging
or Short Messaging Services (SMS) as a Value Added Service (VAS). On October 24, 2011, the
NTC issued Memorandum Circular No. 02-10-2011 entitled ―Interconnection Charge for Short
Messaging Service.‖ (Note: An SMS interconnection or access charge is the fee that mobile
telephone companies or cellular mobile telephone service (CMTS) providers such as Globe, Smart
Communications, Inc. and Digitel Mobile Philippines, Inc. or ―Sun Cellular‖ charge each other for
texts received by their respective networks from one another). The circular required all mobile
telephone companies to reduce their SMS interconnection charge to one another from thirty five
centavos (Php 0.35) per text to fifteen centavos (Php 0.15) per text. In other words, for every text
received by, say, a Globe subscriber from a Smart subscriber, Globe would now only charge Smart
100
Php 0.15 instead of Php 0.35 for said text; and vice versa. The circular also required all CMTS
providers to amend their interconnection agreements (with one another) accordingly to reflect the
above-prescribed revised interconnection charge. Finally, the circular provided that any violation of
the above directive would subject the offending network to penalties pursuant to existing laws, rules
and regulations. On November 8, 2011, or way before the circular‘s effective date of December 1,
2011, Globe and Smart amended their interconnection agreement in compliance with the circular.
Similarly, on November 17, 2011, Globe and Sun Cellular Digitel Mobile Philippines, Inc. revised
their own agreement to reflect the reduced interconnection rate. All three (3) mobile telcos then
started applying said reduced rate of Php 0.15 per interconnected text to each other‘s networks from
November 30, 2011 onwards.
On December 12, 2011, the Commission issued Show Cause Orders to each of them of even date,
all similarly worded, charging them with violating the circular. The Show Cause Order directed
Globe ―to explain in writing within fifteen (15) days from receipt hereof why, despite the issuance of
said Memorandum Circular No. 02-10-2011 lowering the interconnection charge from THIRTY FIVE
CENTAVOS (Php 0.35) to FIFTEEN CENTAVOS (Php 0.15), it failed to lower, as a necessary
consequence, its regular rates for Short Message/Text Message by at least TWENTY CENTAVOS,
and thereafter to appear before this Commission on 10 January 2012 at 9:00 o‘clock in the morning.‖
In addition, the Show Cause Order directed Globe to ―preserve and submit all SMS data records of
all subscribers charged ONE PESO (Php 1.00) per SMS sent containing details such as: SIM No.,
date, quantity of SMS per date from 12:01 A. M. of 01 December 2011 until such time that the
Commission requires. In the meantime, Respondent [herein petitioner Globe] is required to submit a
weekly report to the Commission as to the total quantity of SMS charged ONE PESO (Php 1.00) per
SMS commencing from the aforementioned date.‖
Globe it filed its Answer (Ad Cautelam) with Motion to Dismiss the Show Cause Order dated January
16, 2012 wherein Go informed the Commission that it had just recently offered the public another
permanent innovative service plan called SuperAllTxt80, whereby, for a rate of eighty pesos (Php
80.00), a subscriber would enjoy one hundred (100) texts to all networks. This offering, which
effectively translated to eighty centavos (Php 0.80) per text, was in effect a substantial compliance
with the supposed, albeit unwritten, intent of the questioned circular to lower the regular retail rate
from Php 1.00 to Php 0.80 per text. Globe, however, took great care to emphasize that it had made
this offer voluntarily, firmly asserting its belief that any reduction in retail rates could not be
compelled by mere quasi-legislation as the Commission (as it turned out) had attempted to do
through the aforesaid circular.
On November 20, 2012, the Commission rendered its herein-assailed Decision –the dispositive
portion of which reads:
WHEREFORE, in view of the foregoing, respondent Globe Telecom, Inc. is hereby ordered to :
1. Reduce its regular SMS retail price to other networks from Php1.00 to not more than Php0.80;
2. Refund or reimburse its subscribers the excess charge of Php0.20 per off-net SMS or text
message from the effectivity of the subject MC until fully settled, by crediting the prepaid load
subscribers and/or effecting the refund through the respective subscriber billing for postpaid
subscriber;
3. Pay a fine at the rate of Two Hundred Pesos per day (Php200.00/day) from 01 December 2011,
until the date of compliance; and
4. Immediately submit, within (15) days from receipt hereof, the documents, records and reports
pertaining to SMS sent to other networks (off-net SMS) of all its subscribers who were charged
the regular rate of One Peso (Php1.00) per SMS from the effectivity of the subject MC or on 01
December 2011 with details as required in the Commision‘s Order, dated 12 December 2011,
and the mode of effecting the refund or reimbursement as provided in this Order.
101
On December 5, 2012, Globe seasonably filed a Motion for Reconsideration (of even date) of the
assailed decision. On May 7, 2014, the Commission issued a Resolution, received by Globe on May
8, 2014, denying petitioner‘s aforesaid motion for reconsideration of the assailed decision. The
dispositive portion of said resolution reads:
WHEREFORE, premises considered, after perusal of respondent‘s arguments, the Commision finds
no cogent or compelling reason to disturb its previous order which clearly explained the basis for this
ruling. Thus, the Motion for Reconsideration filed by respondent Globe Telecom, Inc. on 05
December 2012 is hereby DENIED.
HENCE, the appeal to the Court of Appeals.
Globe maintains its position that the Commission rendered its decision in gross violation of Globe‘s
rights, pertinent laws and jurisprudence, and of its own circulars because of the following: 1. NTC
Memorandum Circular No. 2-10-2011 titled ―Interconnection Charge for Short Messaging Service‖
only categorically requires all CMTS providers to reduce their interconnection charge to each other
from Php 0.35 to Php 0.15 per text. The CMTS providers including Globe complied with this
requirement as early as November 2011.; 2. Absolutely nothing in the circular requires the PTEs to
also reduce their retail rate or text message servicing charge to their subscribers from Php 1.00 to
Php 0.80 per text.; 3. Section 5 of the circular provides that ―[v]iolations of herein prescribed
guidelines shall be imposed penalties pursuant to existing laws, rules and regulation[s].‖ Since the
CMTS providers complied with the requirement to reduce their interconnection charge by Php 0.20
per text, there is no basis to penalize them under the circular. Neither is there any basis to penalize
them for not reducing their SMS retail rate by the same amount, because, to repeat, such reduction
is not required by the circular; and 4. Assuming purely arguendo that the circular also required the
CMTS providers to reduce their SMS retail rate, the Commission could not have validly done so via
said piece of quasi-legislation.
102
OWNERSHIP
SHAREHOLDERS
There are approximately 3,332 holders of common equity and 1 holder of voting preferred equity as of
15 June 2014. The following are the top 20 stockholders of the Company:
Stockholder Name
1
2
3
4
5
6
7
8
9
10
11
11
11
11
11
11
11
11
11
11
11
11
11
12
13
14
15
16
17
18
19
20
Asiacom Philippines, Inc.
Singapore
Telecom
International Pte. Ltd.
Ayala Corporation
PCD Nominee Corporation
(Non-Filipino)
PCD Nominee Corporation
(Filipino)
Rodell A. Garcia
The First Nat’l Co., Inc.
Oscar L. Contreras Jr.
Cedar Commodities, Inc.
GTESOP98053
GTESOP98054
GTESOP98055
GTESOP98056
GTESOP98057
GTESOP98058
GTESOP98059
GTESOP98060
GTESOP98061
GTESOP98062
GTESOP98063
GTESOP98064
Bernadette Say Go
Florentino P. Feliciano
R. Nubla Securities Inc.
Ferdinand M. Dela Cruz
Jose Tan Yan Doo
Ma. Teresa Teng
Alfonso S. Teh
Pan Malayan Management &
Investment Corporation
Agro
Resources
&
Development
Casimiro C. Hernandez
158,515,021
Percentage of
Ownership
54.44%
62,646,487
21.51%
40,328,090
13.85%
23,112,146
7.94%
5,720,422
1.96%
28,964
22,000
21,001
17,000
12,900
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
9,487
8,405
8,174
8,071
8,015
6,720
0.01%
0.01%
0.01%
0.01%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
5,991
0.00%
5,330
0.00%
4,940
0.00%
No. of Shares Subscribed
As of June 15, 2014, 85,766,291 shares or 29.45% of total outstanding common and preferred shares
are owned by foreigners.
As of March 31, 2014, 29,466,776 of the total outstanding shares of the Company or 22.21% of common
shares, and 10.1% of the voting shares are owned by the public.
103
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT (OFFICERS) AS JUNE 15, 2014
Director/Officer
Delfin L. Lazaro
Mark Chong Chin Kok
Gerardo C. Ablaza
Romeo L. Bernardo
Tay Soo Meng
Rex Ma. A. Mendoza
Manuel A. Pacis
Ernest L. Cu
Albert M. de Larrazabal
Gil B. Genio
Renato M. Jiao
Rebecca V. Eclipse
Henry Rhoel P. Aguda
Vicente Froilan M. Castelo
Carmina J. Herbosa
Bernard P. Llamzon
Solomon M. Hermosura
Marisalve Ciocson-Co
Total
Common
Shares
3
1
2
1
61,715
3,738
2
24,500
100
65,255
4,322
51,838
21,415
814
20
1,539
235,265
Voting
Preferred
Shares
Total
1
1
1
3
% of
Ownership
3
1
2
1
61,715
3,738
2
24,500
1
101
65,256
4,322
51,838
21,415
814
20
1,539
235,628
0.0000%
0.0000%
0.0000%
0.0000%
0.0212%
0.0013%
0.0000%
0.0084%
0.0000%
0.0000%
0.0224%
0.0015%
0.0178%
0.0000%
0.0074%
0.0000%
0.0003%
0.0000%
0.0000%
0.0000%
0.0005%
0.0808%
None of the members of the Company‘s Board of Directors and management owns 2% or more of the
outstanding capital stock of the Company.
104
Security Ownership of Certain Record and Beneficial Owners and Management as of 15 June
2014
Title of
Class
Name, address of Record Owner and
Relationship with Issuer
Name of Beneficial
Owner & Relationship
with Record Owner
Citizenship
No. of
Shares
Held
% of
total
o/s
shares
Asiacom Philippines, Inc. 1
Asiacom Philippines, Inc.
Preferred 34/F Tower 1 Bldg.,Ayala Ave.,Makati
Filipino
158,515,021 54.44%
(hereafter, ―Asiacom‖)
City
2
Singapore Telecom Int‘l. Pte. Ltd. (STI)
Singapore Telecom Int‘l.
Common
Singaporean
62,646,487 21.51%
31 Exeter Road, Comcentre, Singapore
Pte. Ltd.
Ayala Corporation 3
Common 34/F Tower 1 Bldg.Ayala Ave., Makati Ayala Corporation (―AC‖)
Filipino
40,328,090 13.85%
City
PCD Nominee Corp. (Non-Filipino) 4
PCD Participants acting for
Common G/F Makati Stock Exch. Bldg.,Ayala themselves or for their
Various
23,112,146
7.94%
Avenue, Makati City
customers 5
1
Asiacom Philippines, Inc. 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. Mr.
Jaime Augusto Zobel de Ayala has been named and appointed to exercise the voting power.
2
STI, a wholly-owned subsidiary of SingTel (Singapore Telecom), is a significant shareholder of the Company. As per its Bylaws, STI, through its appointed corporate representatives, has the power to decide how the STI shares in Globe are to be
voted. Mr. Tay Soo Meng has been named and appointed to exercise the voting power.
3
Ayala Corporation 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. Mr. Jaime Augusto Zobel de Ayala has
been named and appointed to exercise the voting power.
4
The PCD Nominee Corporation is a wholly-owned subsidiary of Philippine Central Depository, Inc. and is not related to the
Company. It is the registered owner in the Company‟s books and holds shares on behalf of PCD participants and their
clients.
5
Each beneficial owner of shares through a PCD participant will be the beneficial owner to the extent of the number of shares
in his account with the PCD participant. None of the 23,231,061 common shares registered in the name of PCD Nominee
Corporation (Non-Filipino) beneficially owns more than 5% of the Company‟s common shares.
VOTING TRUST HOLDERS OF 5% OR MORE
There are no voting trust holders of 5% or more.
CHANGES IN CONTROL
No change of control in the Company has occurred since the beginning of last fiscal year.
105
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The following is a discussion and analysis of Globe Group‟s financial performance for the three months
ended March 31, 2014 and 2013 and for the years ended December 31, 2013, 2012 and 2011. The
prime objective of this MD&A is to help the readers understand the dynamics of the Company‟s business
and the key factors underlying its financial results. Hence, Globe‟s MD&A is comprised of a discussion
of its core business, and analysis of the results of operations for each business segment. This section
also focuses on key statistics from the audited consolidated financial statements and unaudited interim
condensed consolidated financial statements and pertains to known risks and uncertainties relating to
the telecommunications industry in the Philippines where we operate up to the stated reporting period.
However, Globe‟s MD&A should not be considered all inclusive, as it excludes unknown risks,
uncertainties and changes that may occur in the general economic, political and environmental condition
after the stated reporting period. The Globe Group has adopted an expanded corporate governance
approach in managing its business risks. An Enterprise Risk Management Policy was developed to
systematically view the risks and to manage these risks in the context of the normal business processes
such as strategic planning, business planning, operational and support processes.
The Company‟s MD&A should be read in conjunction with its annual audited consolidated financial
statements and the unaudited interim consolidated financial statements and the accompanying notes
included in this Prospectus. All financial information is reported in Philippine Pesos (P) unless otherwise
stated.
Any references in this MD&A to “we”, “us”, “our”, “Company” means the Globe Group and references to
“Globe” mean Globe Telecom, Inc., not including its wholly-owned subsidiaries.
KEY PERFORMANCE INDICATORS
Globe is committed to efficiently managing the Company‘s resources and enhancing shareholder value.
The Company regularly reviews its performance against its operating and financial plans and strategies,
and use key performance indicators to monitor its progress.
Some of its key performance indicators are set out below. Except for Net Income, these key
performance indicators are not measurements in accordance with Philippine Financial Reporting
Standards (PFRS) and should not be considered as an alternative to net income or any other measure
of performance which are in accordance with PFRS.
AVERAGE REVENUE PER UNIT (ARPU)
ARPU measures the average monthly gross revenue generated for each subscriber. This is computed
by dividing recurring gross service revenues (gross of interconnect charges) for a business segment for
the period by the average number of the segment‘s subscribers and then dividing the quotient by the
number of months in the period.
SUBSCRIBER ACQUISITION COST (SAC)
1
SAC is computed by totaling marketing costs (including commissions and handset/SIM subsidies )
related to the acquisition programs for the segment for the period divided by the gross incremental
subscribers.
AVERAGE MONTHLY CHURN
The average monthly churn rate is computed by dividing total disconnections (net of reconnections) for
the segment by the average number of the segment‘s subscribers, and then divided by the number of
months in the period. This is a measure of the average number of customers who leave/switch/change
to another type of service or to another service provider and is usually stated as a percentage.
106
EBITDA
EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) is calculated as service
1
2
revenues less subsidy , operating expenses and other income and expenses . This measure provides
useful information regarding a company‘s ability to generate cash flows, incur and service debt, finance
capital expenditures and working capital changes. As the Company‘s method of calculating EBITDA
may differ from other companies, it may not be comparable to similarly titled measures presented by
other companies.
1
2
Computed as non-service revenues less cost of sales, mostly on sale of handsets/SIM packs, accessories & gadgets.
Operating expenses do not include any property and equipment-related gains and losses and financing costs.
EBITDA MARGIN
EBITDA margin is calculated as EBITDA divided by total service revenues. Total service revenue is
equal to total net operating revenue less non-service revenue. This is useful in measuring the extent to
which subsidies and operating expenses (excluding property and equipment-related gains and losses
and financing costs), use up revenue.
EBIT and EBIT MARGIN
EBIT is defined as earnings before interest, property and equipment-related gains and losses and
income taxes. This measure is calculated by deducting depreciation and amortization from EBITDA.
Globe Group‘s method of calculating EBIT may differ from other companies, hence, may not be
comparable to similar measures presented by other companies. EBIT margin is calculated as EBIT
divided by total service revenues.
CORE NET INCOME
Core net income is defined as net income after tax (NIAT) but excluding foreign exchange and mark-tomarket gains (losses), and non-recurring items such as the Company‘s accelerated depreciation charges
resulting from the network modernization and IT transformation program implemented in 2012. Starting
with the 2012 payout, dividends will be computed against prior year‘s core net income instead of
reported net income to ensure that dividends remain sustainable and yields competitive, despite the
expected decline in near-term profits arising from accelerated depreciation charges related to the
transformation efforts. Beginning third quarter of 2014, dividend distribution will be on a quarterly basis
instead of semi-annual. The amended frequency in the payouts will provide the Company with better
cash planning and liquidity management and at the same time ensure a more consistent dividend
distribution to the shareholders.
NET INCOME
As presented in the unaudited condensed consolidated financial statements for applicable periods, net
income provides an indication of how well the Company performed after all costs of the business have
been factored in.
107
2014 INTERIM FINANCIAL AND OPERATIONAL RESULTS
GROUP FINANCIAL HIGHLIGHTS
Globe Group
Quarter on Quarter
1Q
2014
Net Operating Revenues …………….
Service Revenues ...…………………
Non-Service Revenues………….......
Costs and Expenses ………………….
Cost of Sales…………………….......
Operating Expenses ………………....
EBITDA………………………………….
EBITDA Margin………………………...
Depreciation…………………………......
Affected by network modernization..
Others….............................................
EBIT……………………………………...
EBIT Margin…………………………….
Non-Operating Charges……………..
Net Income After Tax (NIAT)………….
Core Net Income.……………………..
24,360
23,230
1,130
15,564
2,867
12,697
8,796
38%
4,068
512
3,556
4,728
20%
(422)
2,949
3,357
4Q
2013
24,816
23,243
1,573
16,595
2,946
13,649
8,221
35%
5,607
733
4,874
2,614
11%
(616)
1,431
2,091
Year on Year
QoQ
Change
(%)
-2%
-28%
-6%
-3%
-7%
7%
-27%
-30%
-27%
81%
-31%
106%
61%
31 Mar
2014
24,360
23,230
1,130
15,564
2,867
12,697
8,796
38%
4,068
512
3,556
4,728
20%
(422)
2,949
3,357
31 Mar
2013
22,470
21,368
1,102
13,694
2,707
10,987
8,776
41%
7,407
3,062
4,345
1,369
6%
(503)
656
3,086
YoY
Change
(%)
8%
9%
3%
14%
6%
16%
-45%
-83%
-18%
245%
-16%
350%
9%

Globe Group's consolidated service revenues for the first quarter improved by 9% to P23.2 billion
from P21.4 billion last year. Revenue growth remained broad-based with the continued strong
performance from all business segments. Mobile revenues grew by 8% from the same period last
year due to sustained growth of Globe Postpaid and TM, which improved by 18% and 9%,
respectively, and was supported by the strong overall subscriber growth. Total mobile subscribers
reached 40.7 million as of end-March 2014, up 16% year-on-year. Globe‘s broadband and fixed line
data segments remained robust, with year-on-year increases of 12% and 19% respectively, due to
expanded customer bases and the sustained demand for data connectivity, while fixed line voice
improved by 3% from same period last year.

On a sequential basis, consolidated service revenues declined by P13 million against the recordhigh revenues reported in the fourth quarter of last year, despite the growth in broadband, fixed line
voice and fixed line data revenues partially mitigating the 1% decline in the mobile segment.

Operating expenses and subsidy increased 14% year-on-year from P12.6 billion to P14.4 billion, as
Globe re-invested its revenue gains in its subscribers, through subsidy and re-contracting expenses,
and its expanded network, through increases in network costs. Subsidy and re-contracting costs
were higher by 8% and 23%, respectively, with more new and existing subscribers signing up for
mid- to high-end plans vis-à-vis last year. To further support the growing subscriber base, Globe
likewise incurred higher trade provisions, advertising and promotions, staff-related expenses and
services charges in the first quarter of 2014. Mitigating these increases in costs, depreciation
charges declined year-on-year, on account of lower accelerated depreciation charges in the first
quarter of 2014 as the bulk of such accelerated depreciation charges were incurred in 2013.
Interconnect costs were also lower against last year. In aggregate, total cost and expenses,
including depreciation, for the first quarter of 2014 declined by 7% year-on-year from P20.0 billion to
P18.5 billion. On a sequential basis, cost and expenses including depreciation, decreased by 10%
quarter-on-quarter, from P20.6 billion in the fourth quarter of 2014.
108

Consolidated EBITDA for the first three months of the year stood at P8.8 billion, up by P20.0 million
against the same period last year, as the top line growth coupled by lower interconnection fees
slightly outpaced the increases in operating expenses and subsidy. EBITDA margin declined from
41% in the first period of 2013 to 38% in the first quarter of the year. On a quarterly basis,
consolidated EBITDA improved by P575 million or 7%, driven by costs improvements quarter-onquarter and resulting in EBITDA margin improvement from 35% in the fourth quarter of the year.

Total depreciation expenses dropped year-on-year and quarter-on-quarter by 45% and 27%,
respectively as bulk of the accelerated depreciation charges related to network and IT transformation
projects was already incurred in 2013.

Non-operating charges declined year-on-year and quarter-on-quarter by 16% and 31%, respectively,
driven by lower net foreign exchange and mark-to-market losses coupled with lower interest
expenses recognized during the period.

The Company ended the three-month period with consolidated net income after tax of P2.9 billion,
350% higher against the P656 million reported net income in the first quarter of 2013. This was
driven by slightly higher EBITDA, lower depreciation charges, and less foreign exchange and markto-market losses and softer interest expenses recognized during the period. Excluding the nonrecurring accelerated depreciation expenses and foreign exchange and mark-to-market gains and
losses, core net income after tax reached P3.4 billion as of end March of 2014, representing a 9%
increase from than the same period last year. On a sequential basis, net income after tax likewise
improved by 106% from P1.4 billion last quarter due mainly to lower depreciation charges. Core net
income after tax, likewise increased by 61% from last quarter's P2.1 billion.

As of March 2014, total cash capital expenditures stood at about P4.7 billion, 32% lower than last
year's level of P6.9 billion. Globe continues to embark on its network and IT modernization
programs, building more sites to adapt to the changing landscape in the country‘s key business
districts, boosting capacity and enhancing the overall network performance. To date, over 90% of
the network is already on 4G HSPA+ providing faster mobile browsing experience for Globe‘s
subscribers. To support the requirements of its subscribers for 2G, 3G and 4G services, Globe has a
total of 22,813 base stations, including over 8,400 4G base stations.
GROUP OPERATING REVENUES
Operating Revenues By
Businesses (P Million)
Globe Group
Quarter on Quarter
(Unaudited)
1Q
4Q
QoQ
31 Mar
2014
2013
Change
(%)
Year on Year
(Unaudited)
31 Mar
2014
2013
YoY
Change
(%)
Mobile
Service Revenues .………….
Non-Service Revenues……...
19,333
18,456
877
19,785
18,691
1,094
-2%
-1%
-20%
19,333
18,456
877
18,053
17,124
929
7%
8%
-6%
Fixed Line and Broadband
Service Revenues …………..
Non-Service Revenues……...
Total Operating Revenues……
5,027
4,774
253
24,360
5,031
4,552
479
24,816
5%
-47%
-2%
5,027
4,774
253
24,360
4,417
4,244
173
22,470
14%
12%
46%
8%
The Globe Group closed the first quarter with total operating revenues of P24.4 billion, up 8% from last
year. Compared to last quarter‘s result, operating revenues were slightly down by 2% from P24.8 billion.
109
Mobile revenues, which accounted for 79% of consolidated service revenues as of end-March, increased
to P18.5 billion, up by 8% from last year‘s level of P17.1 billion due higher revenue contributions from
mobile data and domestic voice. This was likewise complemented by the continued subscriber growth
across all brands.
Broadband and fixed line businesses which comprise 21% of consolidated service revenues likewise
sustained its growth momentum across all segment with both broadband and fixed line data growing in
double digits at 12% and 19%, respectively. Traditional fixed voice revenues likewise rebounded this
period bringing year-on-year growth to 3%. Year-on-year increase in broadband to P2.8 billion from P2.5
billion last year and the 5% quarter-on-quarter growth was fueled by aggressive and competitive wireless
and wired broadband offers. Globe ended the first three months with 2.2 million broadband subscribers,
up by 26% from same period last year. Compared to the previous quarter, total broadband, fixed line
data and fixed line voice improved by 5%, 6% and 3%, respectively.
Mobile non-service revenues declined year-on-year and quarter-on-quarter by 6% and 20%,
respectively. Fixed line and broadband non-service revenues, on the other hand, increased compared
to the previous year by 46% mainly on sales on the back of strong broadband acquisitions, but
compared to previous quarter, it declined by 47%.
MOBILE BUSINESS
Quarter on Quarter
(Unaudited)
1Q
4Q
Mobile Service Revenues (P
Million)
2014
2013
QoQ
Change
(%)
Year on Year
(Unaudited)
31 Mar
31 Mar
2014
2013
YoY
Change
(%)
Service Revenues *
1
Voice ..……………………….........
2
SMS ………………………...........
8,658
7,008
3%
-5%
8,658
7,008
7,670
6,961
13%
1%
3
2,790
2,927
-5%
2,790
2,493
12%
Mobile Service Revenues…..........
18,456
18,691
-1%
18,456
17,124
8%
Mobile Browsing and Other Data ..
1
8,377
7,387
Mobile voice service revenues include the following:
a)
b)
c)
d)
e)
f)
Prorated monthly service fees on consumable minutes of postpaid plans;
Subscription fees on unlimited and bucket voice promotions including the expiration of the unused value of denomination
loaded;
Charges for intra-network and outbound calls in excess of the consumable minutes for various Globe Postpaid plans,
including currency exchange rate adjustments, or CERA, net of loyalty discounts credited to subscriber billings; and
Airtime fees for intra network and outbound calls recognized upon the earlier of actual usage of the airtime value or
expiration of the unused value of the prepaid reload denomination (for Globe Prepaid and TM) which occurs between 3 and
120 days after activation depending on the prepaid value reloaded by the subscriber net of (i) bonus credits and (ii) prepaid
reload discounts;
Revenues generated from inbound international and national long distance calls and international roaming calls; and
Mobile service revenues of GTI.
Revenues from (a) to (f) are reduced by any payouts to content providers.
2
Mobile SMS revenues consist of local and international revenues from value-added services such as inbound and outbound SMS
and MMS, infotext, and subscription fees on unlimited and bucket prepaid SMS services, net of any interconnection or settlement
payouts to international and local carriers and content providers.
3
Mobile browsing and other data service revenues consist of local and international revenues from value-added services such as
mobile internet browsing and content downloading, mobile commerce services, other add-on VAS, and service revenues of GXI
and EGG, net of any interconnection or settlement payouts to international and local carriers and content providers.
110
Mobile Voice
Mobile voice revenues, which accounted for 47% of total mobile service revenues, grew by 13%
compared to the same period last year due to the increase in unlimited and bulk domestic voice
subscriptions. Against the fourth quarter mobile voice registered a 3% growth.
Globe remains the only operator in the country that offers per-second voice charging with Globe‘s Super
Sakto Calls and TM‘s Sulit Segundo which allow subscribers to make a local call for only P0.15 per
second. The Company continues to provide attractive and affordable bulk voice offers such as Tawag
236 for 20-minute consumable calls for only P20 for Globe Postpaid and Globe Prepaid subscribers and
TM‟s TodoTawag 15/15 service for 15-minute on-net call for only P15. TM subscribers may also
subscribe to SuliTawag for only P5 for 3-minute Globe and TM network calls and TM Dagdag Call worth
P5 which is an add-on service to subscribers registered to TM‘s text promotions that provides 3-minute
on-net calls. Likewise, GoCall100 was made available via GoSakto which provide Globe Prepaid
subscribers 500 minutes of on-net calls to Globe/TM for only P100 for 7 days.
In addition, for Filipinos who wish to stay connected with their loved ones abroad, Globe continues to
offer its pioneering per-second charging for international voice calls, IDD Sakto Calls for both Globe
Postpaid and Globe Prepaid subscribers. Globe Prepaid‘s GoTipIDD service remains to be the lowest
per-minute IDD rates in the market. In addition, Globe also provides a bucket IDD service to popular
and selected overseas destinations with its IDD Tingi promotion, while offering its TipIDD card at various
Globe distribution channels. The Company‘s international voice services also include Super IDD, an
unlimited call service for 24 hours to select destinations worldwide, and Globe Duo International, which
provides registered Globe Postpaid and Globe Prepaid subscribers with virtual US landline numbers
which they can use to communicate with their loved ones in the USA. Families and friends in the USA in
turn may call their loved ones back in the Philippines and be charged at domestic US rates. This service
was further expanded to cover Korea, Canada and UK with the launch of Globe DUO Korea, Globe DUO
Canada and Globe DUO UK where it assigns a Korean, Canadian or UK number to a Globe/TM mobile
number in the Philippines which subscribers may use to call friends and loved ones in Korea, Canada
and UK directly while enjoying local (Korea/Canada/UK) domestic calling rates. In the same manner,
incoming calls from Korea, Canada and UK to Duo numbers registered in the Philippines are also
charged at local Korean, Canadian and UK rates. Globe Duo Korea, Globe Duo Canada and Globe Duo
UK are available to Globe Postpaid, Globe Prepaid, and TM subscribers. In addition during the last
quarter of 2013, TM launched TipIDD30 which offer four (4) minutes of international calls to Saudi, UAE,
Kuwait, Bahrain, Italy, UK, Australia and Japan for only P30 a day.
The Company also provides its subscribers with the best possible mix of voice, SMS, and mobile
browsing services through its combo packages. For Globe Prepaid, subscribers have the choice to
avail of All-Unli Trio60, SuperUnliAllTxt 25, SuperAll Txt 20, Super Combo 20 and All Net Combo.
Another option that Globe Prepaid subscribers may choose to avail of is GoUnli, which provides
unlimited SMS to all networks as well as unlimited on-net calls, and unlimited use of Facebook. The
Company likewise offers Immortal Trio to Globe Prepaid subscribers to allow 50 on-net SMS, 5 allnetwork texts and 5 minutes of on-net calls for only P25 per subscription. Globe Prepaid subscribers
also have the option to subscribe to UnliTingi to get unlimited all-network texts, unlimited on-net calls,
and unlimited mobile browsing valid for 1 hour for only P5. SuperUnli, which allows unlimited calls and
SMS within the Globe and TM networks, is also available for one day subscription for Globe Prepaid
subscribers for only P25. Another industry-shaking innovation from Globe Prepaid is the launch of
GoSakto in 2013 which empowers the subscribers and gives them the flexibility to tailor-fit their prepaid
promo based on their calling, texting and surfing needs for the day, week or month. On top of this,
subscribers can even name the offer they created and share it among their friends on Facebook to allow
their friends to register to the same promo. Additionally, Globe, in partnership with Viber, launched
several value-for-money service offerings in order to give its Globe Prepaid subscribers a richer mobile
experience. GoUnli25, which offers the all-time favorite unlimited on-net voice and texts was made even
better with FREE unlimited Viber Chat offered at the same price of P25. Likewise, Globe Prepaid‘s
GoUnli30 which allows unlimited all-network SMS, unlimited on-net call and unlimited Facebook valid for
a day was further improved during the third quarter of 2013 to include the best Chat Apps for the same
price of P30. Globe Prepaid subscribers can call their friends abroad using Viber, enjoy real-time IM
111
conversations via FB Messenger, send cute, animated stickers using Kakao, and even leave
personalized walkie-talkie voice messages using WeChat! Other chat apps like Whatsapp, Line and
GMessage can also be used for free with NO WIFI needed.
For TM on the other hand, subscribers can choose from a wide array of unlimited and bucket offers
which will best fit their budget and lifestyle. Among the Unlimited Promo, TM subscribers can avail of
UnliCombo for as low as P15 for 1 day if they want to get unlimited on-net calls from 11PM to 6AM the
following day and unlimited on-net SMS for 24 hours. Alternatively, they can subscribe to UnliCombo20
if they want to get unlimited on-net calls from 10 PM to 5 PM the following day and unlimited on-net SMS
for 24 hours. Subscribers may also opt to choose a 2-day unlimited on-net SMS with Astigtxt15.
Bucket text and call services are likewise available for as low as P10 for an unlimited on-net SMS and
bulk on-net voice calls with AstigCombo10. Astigcombo15 is also available which gives unlimited on-net
texts and 30 minutes on-net calls for P15 a day. TM subscribers may avail of Combo15 to get unlimited
on-net SMS, 50 all-network text service, and 10 consumable minutes within the TM and Globe networks
for 2 days as well as Combo20 which offer unlimited on-net texts to Globe/TM plus 50 All-net texts and
20 minutes calls to Globe/TM for only P20. On top of this, TM subscribers can now extend for another
24 hours their favorite TM promo for only P5.
Mobile SMS
Mobile SMS which accounted for 38% of total mobile service revenues, closed the first quarter at P7
billion, slightly higher by 1% from same period last year. However, on a sequential basis, mobile SMS
revenues declined by 5% coming off from highs in the seasonal fourth quarter of last year.
Globe showcases a comprehensive line up of mobile SMS services ranging from unlimited and bucket
text services to combo voice, SMS and surf promotions. Globe continues to provide its prepaid
subscribers with all-day unlimited on-net SMS with UnliTxt and AstigTxt, respectively. Globe Postpaid
and Globe Prepaid subscribers may get 30 days of unlimited on-net text service by subscribing to
SuperTxt. TM subscribers can likewise subscribe to other variants of the AstigTxt offering for unlimited
on-net SMS valid for 2 days, 3 days, or 5 days. For on-net bucket SMS offers, Globe continues to
provide SuliTxt which allows 100 and 25 text messages for a single day subscription. The Company
also offers all-network text services such as My SuperTxt All, an unlimited text service for 30 days
available for postpaid subscribers and UnliTxtAll20 for a 1-day unlimited SMS to all networks for TM
subscribers. All network bucket text services are likewise available with Globe Prepaid‘s SuperAllTxt for
250 SMS and TM‘s AstigTxtAll for 150 SMS, both valid for a day. Meanwhile, in response to the
market‘s clamor for prepaid offers with longer validity periods, Globe Prepaid likewise introduced via
GoSakto GoUnlitxt49 which offer its subscribers unlimited on-net texts to Globe/TM for only P49. TM
subscribers may avail of Combo10 and Combo15 to get unlimited on-net SMS, 50 all-network text, and
10 consumable minutes to TM and Globe subscribers. Likewise, AstigItxt20 was introduced in the
market during the last quarter of 2013 which gives TM subscribers 30 international and all-network texts
for only P20 valid for 1 day.
Mobile Browsing and Other Data
Mobile browsing & other data revenues which accounted for 15% of total mobile service revenues
increased to P2.8 billion as of end-March 2014, up 12% from P2.5 billion in March 2013, driven by the
continuous demand for data services and the popularity of data-driven products and applications, the
increased pervasiveness of Globe‘s 3G, HSPA+ and LTE networks and the proliferation of data-enabled
smartphones. On a sequential basis, mobile browsing & other data revenues declined by 5%, given the
full quarter impact of the Free Facebook promo launched last November 2013. However, the Free
Facebook campaign showed promising result as it helped seed the habit of internet access on our
wireless data networks, with registered mobile data services doubling during the promo period.
Globe‘s mobile browsing services includes unlimited chatting, downloading, emailing, and surfing offers
to its Globe Postpaid and Globe Prepaid subscribers with its add-on data plan SuperSurf for as low as
P50 for 1 day. The Company also offers consumable mobile browsing for as low as P15 for 1 hour with
112
Prepaid Power Surf for its Globe Prepaid and TM subscribers. Prepaid and Postpaid subscribers can
avail of different Power Surf variants: 50MB for only P99, 300 MB for only P299 and 1GB for only P499.
All Power Surf plans are automatically bundled with the Globe No Bill Shock Guarantee, so subscribes
who exceed their monthly MB allocations will never pay more than P999. For unlimited access to
Facebook, Super Facebook and TM Astig Facebook are available for only P10 a day for its Globe
Prepaid and TM subscribers. Meanwhile, Globe and TM Prepaid subscribers who want a full Viber
experience with unlimited high-definition voice calls and unlimited chat can avail of Viber20 for P20 a day
and those who want unlimited Viber chat only can either avail of Viber10, a one day variant for only P10
or Viber30 for five days unlimited Viber chat for P30. Prepaid subscribers who just want unlimited
access to messaging applications (Viber, Whatsapp, Line, FB Messenger, Kakao etc.) may opt to
register to Unlichat25 for only P25.
For BlackBerry® users, the Company continues to offer Super Surf for BlackBerry® Max for all-in
unlimited BlackBerry® services for as low as P50 a day. Globe also provides unlimited use of push
email applications such as Yahoo! Mail, GMAIL, MSN and any POP3 or IPOP email account with its
add-on data service BlackBerry® Messaging. The Company also provides unlimited access to social
networking applications with its BlackBerry® Social offering of P299 valid for 30 days. For unlimited use
of BlackBerry® Messenger and free on-net SMS, Globe Postpaid and Globe Prepaid subscribers may
register to BlackBerry® Chat.
Setting another milestone in Philippine telecommunications, the Company gave its over 40.7 million
subscribers (Postpaid/Prepaid/TM) free mobile phone access to Facebook beginning October 31, 2013
and was extended until April 30, 2014. Globe worked closely with Facebook to enable customer
experience innovations for the best free Facebook offer (users can post, like, comment, chat, add
friends, upload photos, share posts, and more on Facebook) without the need for Wi-Fi. This campaign
is in line with Globe‘s strategy to bring more people online and overcome the fear of using mobile
internet, and increase the habit of mobile browsing and surfing over Globe‘s improved 3G, HSPA+ and
LTE networks.
113
The key drivers for the mobile business are as follows:
Quarter on Quarter
4Q
1Q
2014
2013
40,749,094
38,475,130
2,088,413
2,025,538
38,660,681
Globe Prepaid………………………..
TM.…………………………………….
Cumulative Subscribers (or SIMs) – Net
Globe Postpaid 1………………………….
Prepaid.………………………………….
Net Subscriber (or SIM) Additions
Globe Postpaid..……………………...…..
Prepaid.……………………………….
QoQ
Change
(%)
Year on Year
31 Mar
31 Mar
YoY
Change
(%)
2014
2013
6%
40,749,094
35,141,918
16%
3%
2,088,413
1,857,342
12%
36,449,592
6%
38,660,681
33,284,576
16%
18,699,346
17,836,441
5%
18,699,346
16,946,327
10%
19,961,335
18,613,151
7%
19,961,335
16,338,249
22%
2,273,964
1,958,419
16%
2,273,964
2,022,883
12%
62,875
45,980
37%
62,875
122,874
-49%
2,211,089
1,912,439
16%
2,211,089
1,900,009
16%
862,905
872,502
-1%
862,905
506,185
70%
TM.…………………………………….
1,348,184
1,039,937
30%
1,348,184
1,393,824
-3%
1,140
1,178
-3%
1,140
1,105
3%
Globe Prepaid…………………….....
128
140
-9%
128
141
-9%
TM……………………………………..
77
81
-5%
77
86
-10%
9,074
7,607
19%
9,074
7,972
14%
23
28
-18%
23
20
15%
TM.…………………………………….
15
35
-57%
15
21
-29%
2.2%
2.2%
2.2%
1.6%
5.4%
5.7%
5.4%
5.1%
TM.………………………………….....
6.5%
7.0%
6.5%
5.6%
Average Revenue Per Subscriber (ARPU)
ARPU 2
Globe Postpaid…………………………...
Prepaid
Subscriber Acquisition Cost (SAC)
Globe Postpaid…………………………...
Prepaid
Average Monthly Churn Rate (%)
Globe Postpaid....………………………...
Prepaid
1
As of 1Q 2014, Globe had a total of 2.50 million wireless postpaid subscribers which include 2.09 million mobile telephony and
0.41 million wireless broadband customers. This is higher compared to the 2.42 million wireless postpaid subscribers as of 4Q
2013. Mobile telephony revenues are reflected under “Mobile Service Revenues” while wireless broadband revenues are included
under “Broadband.”
2
ARPU is computed by dividing recurring gross service revenues (gross of interconnect expenses) segment by the average
number of the segment‟s subscribers and then dividing the quotient by the number of months in the period.
Globe ended the first quarter with a total mobile subscriber base of 40.7 million, up 16% from 35.1
million subscribers versus same period last year. First quarter‘s gross subscriber acquisitions once
again registered a record-high of 9.1 million subscribers, 3% higher than the strong fourth quarter
additions. This was mainly contributed by the record acquisitions of the Company‘s mass market brand
(TM) as well as increased Postpaid subscriptions. The Free Facebook campaign helped drive
subscriber uptake particularly on the prepaid side of the business. Despite the elevated blended churn
114
rate as of end-March of 2014 of 5.77% from 5.14% of same period last year, full year net incremental
subscribers leapt to 2,273,964, 12% higher than 2013 level of 2,022,883 net additions.
The succeeding sections cover the key segments and brands of the mobile business – Globe Postpaid,
Globe Prepaid and TM.
Globe Postpaid
Globe remained to be the leader in the postpaid segment with the continued growth in acquisitions as of
first quarter of 2014 registering over 2.0 million subscribers from 1.9 million in the same period last year.
The continued success of the fully-customizable and best-in-class postpaid plans together with the
exclusive device offers and innovative deals helped boost gross additions to reach 199,691 as end of
first quarter. Year-to-date net incremental postpaid subscribers stood at 62,875, 49% lower than 2013
level of 122,874.
In order to sustain the growth momentum for mobile postpaid and maintain its leadership on this
segment of the market, the Company boosted its offerings during the first quarter of 2014.
Globe Postpaid ARPU of P1,140 was above than last year‘s P1,105 as a result of a higher mix of mid to
high-end MSF plans.
Globe Postpaid subscriber acquisition cost (SAC) significantly increased year-on-year and quarter-onquarter by 14% and 19%, respectively, driven by Globe‘s second-highest quarterly gross activations
coupled with the shift in mix to high and mid-end plans. However, Globe Postpaid SAC remained
recoverable within the 24-month contract period.
Prepaid
Globe‘s prepaid segment, which includes the Globe Prepaid and TM brands, accounts for 95% of its
total mobile subscriber base. As of the first quarter of 2014, cumulative prepaid subscribers stood at
about 38.7 million, 16% better than last year‘s level of 33.3 million.
A prepaid subscriber is recognized upon the activation and use of a new SIM card. The subscriber is
provided with 60 days (first expiry) to utilize the preloaded SMS value. If the subscriber does not reload
prepaid credits within the first expiry period, the subscriber retains the use of the mobile number but is
only entitled to receive incoming voice calls and text messages for another 120 days (second expiry).
The second expiry is 120 days from the date of the first expiry. However, if the subscriber does not
reload prepaid credits within the second expiry period, the account is permanently disconnected and
considered part of churn. The first expiry periods of reloads vary depending on the denominations,
ranging from 1 day for P10 to 60 days for P300 to P500 reloads. The first expiry is reset based on the
longest expiry period among current and previous reloads. Under this policy, subscribers are included in
the subscriber count until churned.
In 2009, the National Telecommunications Commission (NTC) published Memorandum Circular 03-072009 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 gross acquisitions slightly improved in the first quarter versus the preceding quarter‘s
record highs, bringing gross additions to 3.8 million or 25% higher than same period last year‘s level of
115
3.1 million. First quarter‘s net incremental subscribers also improved by 70% to 862,905 from 506,185 in
2013, despite the elevated churn rates of 5.45% this period from 5.12% in same period last year.
During the first quarter of 2014, Globe Prepaid further intensified its customizable service offerings with
the launch of the new GoUnli25 via the ―GO SAKTO‖ mobile app (which can now be downloaded on the
Apple App Store or Google Play) or by dialing *143#. The new GoUnli25 now offers unlimited texts and
calls to Globe/TM, unlimited Facebook, plus a choice of one FREE app (from the following: twitter,
instagram, google, yahoo, viber, foursquare) still at P25/day.
Globe Prepaid ARPU declined by 9% year-on-year resulting from the revenue dilution from unlimited and
bucket service offerings. Globe Prepaid SAC increased by 15% versus same period last year due to
higher ads and promo, but declined by 18% compared to last quarter due to lower marketing spend on
ads during the period.
b. TM
TM on the other hand, generated the highest gross acquisitions during the quarter, 5,087,842 new SIMs
or 6% better than previous quarter level of 4,818,252. The extension of the free Facebook promo
boosted this quarter‘s acquisition coupled by TM‘s continued aggressive acquisition efforts. Due to the
increased churn rate as of end March 2014, net incremental subscribers declined by 3% from about 1.4
million in 2013 to only 1.3 million this period.
During the period, TM introduced a new affordable and cheap promo offer with UNLICALL15 giving its
subscribers with Unlimited call to all Globe and TM subscribers for as low as P15 valid for 1 day and also
the new UNLIALLNET10 which provides its subscribers with unlimited texts to all networks for P10 a
day.
TM ARPU was down by 10% year-on-year with the continued shift from regular pay-as-you-use service
to unlimited and value offers. TM SAC, however, declined from same period a year ago and from last
quarter by 29% and 57%, respectively due to increased ads and promo.
GCash
GCash continues to establish its presence in the mobile commerce industry. GCash‘s initial thrust
towards money-transfers, purchase of goods and services from retail outlets, and sending and receiving
domestic and international remittances has spurred alliances in the field of mobile commerce.
Today, GCash allows Globe and TM subscribers to pay or transact for the following using their mobile
phone:











domestic and international remittances
utility bills
interest and amortization of loans
insurance premiums
donations to various institutions and organizations
sales commissions and payroll disbursements
school tuition fees
micro tax payments and business registration
electronic loads and pins
online purchases
airline tickets
In addition to the above transactions, GCash is also used as a wholesale payment facility. In 2011,
Globe increased the number of establishments that offer GCash as an alternative and efficient payment
mode. Quick Delivery tapped GCash to be its newest payment mode to make it easier, safer and more
116
convenient to order food from Metro Manila‘s top restaurants, specialty stores, and even wine
merchants. The largest local chain of movie theaters, SM Cinema, was able to launch the first mobile
ticketing service in the country through GCash, allowing moviegoers to purchase tickets online, pay via
GCash, and redeem movie tickets at the cinemas using their mobile phones.
In October 2010, Globe launched the GCash Card, the country‘s first customizable ATM card linked to a
mobile wallet. This gives subscribers 24/7 access to GCash and allows them to withdraw funds via any
of the 9,000 Bancnet, Megalink, ExpressNet or Encash Automated Teller Machines (ATMs) nationwide.
In addition, the GCash Card is the only customizable ATM Card in the country where subscribers can
make their own personalized ATM card design or choose from a variety of design templates.
In 2011, GCash further strengthened its presence in the mobile money transfer business by establishing
partnerships with various institutions. Globe partnered with Ericsson to integrate GCash into the new
Ericsson Money Services making GCash one of the first partners for this innovative end-to-end mobile
money solution. The Company also inked a partnership with US-based IDT Corporation which will
enable GXI to strengthen its GCash Remit‘s international remittance service by facilitating connectivity
between traditional money transfer operators and GCash utilizing IDT‘s economical corridor routing,
transaction settlement and foreign currency exchange services. Globe, through GXI, also partnered with
Japan‘s SOFTBANK Corp. through its subsidiary SBPS for an affordable, convenient, and secure
remittance service that will allow Filipinos living and working in Japan to remit money to the Philippines
via the GCash platform. The Company likewise set up a partnership with Xpress Money, a leading
global instant money transfer brand, to further extend the latter‘s strong payout network in the
Philippines. With this tie-up, beneficiaries of Xpress Money Cash Pick Up remittances can now claim
their money from the network of GCash Remit outlets nationwide.
In 2012, Globe launched GCash PowerPay+ to provide an additional channel to facilitate mobile
transactions. GCash PowerPay+ is a funds disbursement service linked to a Globe or TM SIM and
comes with an optional insurance coverage. With GCash PowerPay+,users enjoy mobile money
services like sending money, buying Globe or TM airtime load with a rebate (ranging from 7% to 10%
depending on the amount of load), and paying bills at the speed of a text message without the need to
cash-in to one‘s GCash account. It also allows 24/7 withdrawal from any of the 9,000 Automated Teller
Machines (ATMs) nationwide, cashless shopping through Megalink, BancNet and ExpressNet point of
sale and financial assistance for accidental death and burial assistance, life cover, residential fire, and
ATM theft.
Globe has also launched GCash Remit Service to provide mobile subscribers a quick, affordable and
convenient way to send and receive domestic and international remittances. With the approval of the
Bangko Sentral ng Pilipinas (BSP) to use its sub-distributors as cash-in and cash-out outlets, GCash
now has the largest remittance network in the country with more than 9,000 active GCash outlets
nationwide.
Meanwhile, for electronic banking services, GCash secured a partnership with Philippine Savings Bank
(PSBank), the thrift banking arm of the Metrobank Group, to enhance its electronic banking channels.
Through GCash, PSBank accountholders can do various financial transactions such as payments,
account inquiries and reloading from their PSBank account to their enrolled GCash wallet and viceversa. In the same manner, Globe partnered with UnionBank of the Philippines (UnionBank) for its
eMoneyXchange service that will allow customers to link their UnionBank accounts to their GCash
mobile wallets enabling UnionBank clients with EON, E-Wallet, ePayCard and UnionBank regular
savings and checking accounts to transfer funds to and from their GCash wallets through their
UnionBank account via SMS.
To further complement its mobile wallet functions, Globe partnered with American Express® to launch
the GCash American Express® Virtual Card. The prepaid virtual card is linked to a subscriber‘s GCash
mobile wallet and allows users to shop conveniently online from both local and international sites.
Further, it gives the user a personalized US Address to allow delivery of purchases from international
online sites which may not be directly shipping goods to the Philippines.
117
To reach out to a wider audience and complement the increased smartphone penetration, Globe
launched a GCash mobile application for BlackBerry® devices in 2011. The mobile application can be
downloaded for free via the BlackBerry® App World. Beginning third quarter of 2012, however, the
Company has made the GCash mobile wallet available and accessible to a wider subscriber base who
may download the application for free from the App Store and Google Play.
The efficiency of GCash‟s mobile cash transfer system was recognized by various government agencies
and socially-oriented organizations such as DSWD (Department of Social Welfare and Development),
Simbahang Lingkod ng Bayan (SLB), and the United Nations World Food Programme (WFP). In 2011,
GCash Remit was tapped by DSWD and Land Bank of the Philippines for the distribution of the
government‘s Conditional Cash Transfers (CCT). A total of about P4.5 billion worth of CCT were
distributed to beneficiary families in over 9,000 barangays nationwide via its domestic cash pick-up
service. The GCash platform was also utilized by SLB, a church-based, Jesuit-led organization, as a
donation channel for its relief operations for typhoon victims. The WFP meanwhile named GCash as a
benchmark for their operations worldwide. WFP is the world‘s largest humanitarian agency fighting
hunger worldwide. WFP is currently involved in the disaster relief operations for typhoon Sendong
victims in Mindanao. To improve its efficiency in delivering assistance, WFP has tapped Globe through
its GCash mobile technology platform for the fast, secure and low-cost delivery of financial assistance to
families who were severely affected by calamities. The partnership flourished with Globe providing the
necessary platform to facilitate the Cash-for-Work program and other relief and recovery operations by
the WFP. Through GCash, WFP discovered a new and efficient way of providing financial assistance to
help families restore and rebuild their lives.
On June 19, 2013, Globe achieved another milestone with its partnership with Home Development
Mutual Fund (HDMF) or the PAG-IBIG Fund to allow their over 12.6 million members to transact with
Pag-ibig via GCash, making it easy and more convenient for them to facilitate their Pag-Ibig
transactions. Pag-Ibig members can now easily pay their monthly mandatory savings and housing loans
anytime, anywhere using their GCash wallets linked to their Globe or TM phones, eliminating the need to
go to a Pag-Ibig office or an accredited payment center.
Also, GCash can now be used to purchase load even for other mobile networks via *143#. In addition,
CitiExpress and Unilink, as new GCash express partners, started offering GCash express cards to their
customers.
Moreover, GCash, is set to expand its network service in the country by growing its user base with the
recent partnership with TORCHe Global Marketing, Inc. (TGMI), a marketing consultancy firm focused
on helping companies reach out to the widest possible consumer base through the latest technologies in
mobile commerce and advertising. GCash services that will be made available for use of TGMI affiliates
include PowerPay+ Card, Buy Load service and Gcash outlets.
During the last quarter of 2013, several initiatives on GCash were launched in order to expand its
portfolio of services including real property tax payments via GCash available in Quezon City and
Valenzuela; buy through blink coupon codes for subscribers to experience unlimited Movie and TV show
streaming; or convert Gcash to rewards points. In addition, subscribers can now also apply for BanKO
loan via GCash with low interest rate, fast approval and hassle-free loan payments. Loan credit and
collection will be through their GCashPowerPay+ wallet.
In 2014, GCash may now be used at Puregold to pay for groceries, bills and for cash remittances. Also,
Globe Charge Mobile Card Reader was likewise introduced to the market last March 27, 2014 which
turns the subscriber‘s smartphone into a credit card terminal.
BPI Globe BanKo
On October 9, 2009, the Company announced that the BSP has approved the sale and transfer by Bank
of the Philippine Islands (BPI) of its shares of stock in Pilipinas Savings Bank, Inc. (PSBI) that will result
118
in the ownership of PSBI as follows: 40% each for BPI and Globe Telecom and 20% for Ayala
Corporation (AC). On October 23, 2009 the official name of PSBI was changed to BPI Globe BanKo,
Inc. after getting the approval of both the BSP and the Securities and Exchange Commission (SEC). BPI
Globe BanKo, Inc. is the country‘s first mobile microfinance bank.
BPI Globe BanKo, Inc. opened its first branch last February 2010, and added 5 provincial branches
located in Dipolog, Dumaguete, Lucena, Naga and Tacloban. While the bank‘s initial focus is on
wholesale lending to other microfinance institutions, it is now expanding into retail banking products and
services to include micro-savings, micro-lending, and insurance.
In 2011, BPI Globe BanKO, Inc. launched an innovative product that does not only generate healthy
financial returns, but also gives depositors an opportunity to help those in the low-income segment by
helping create a solid base for their savings and investments. Called the BanKO Social Initiative (BSI)
Deposit, the product is a passbook-based, regular savings account which pays 4.5% interest per annum
on a quarterly basis. The minimum deposit requirement is P100,000 with a hold-out period of at least 6
months. The BSI Deposit account, which does not charge depositors with documentary stamp taxes, is
also insured with the PDIC for amounts up to P500,000 per depositor.
In 2013, BPI-Globe Banko, the first mobile-based, microfinance-focused savings bank in the Philippines,
have joined hands with US Agency for International Development, in helping rural communities gain
access to formal financial services (i.e. cash in and cash out transactions, bills payment, airtime loading,
money remittance, and micro-insurance purchase) using their mobile phones. This partnership was
announced during the launch of the mobile money financial service for the llijan Multi-Purpose
Cooperative.
In 2014, Globe BanKO launched BanKO Interoperability (Phase 1), which allows all BanKO customers to
make Cash-in and Cash-out transactions in almost all GCash outlets nationwide.
119
FIXED LINE AND BROADBAND BUSINESS
Service Revenues
(P Million)
Quarter on Quarter
(Unaudited)
4Q
QoQ
1Q
2014
2013
Change
31 Mar
Year on Year
(Unaudited)
31 Mar
YoY
2014
2013
Change
Service
Broadband 1………………………
2,790
2,663
5%
2,790
2,486
12%
Fixed line Data 2..………………...
1,319
1,242
6%
1,319
1,111
19%
665
647
3%
665
647
3%
4,774
4,552
5%
4,774
4,244
12%
3
Fixed line Voice ….…………….
Fixed line & Broadband Service
Revenues……...……………………….
1
Broadband service revenues consist of the following:
a)
b)
c)
d)
2
Fixed line data service revenues consist of the following:
a)
b)
c)
d)
3
Monthly service fees of wired, fixed wireless, and fully mobile broadband data only and bundled voice and data
subscriptions;
Browsing revenues from all postpaid and prepaid wired, fixed mobile and fully mobile broadband packages in excess of
allocated free browsing minutes and expiration of unused value of prepaid load credits;
Value-added services such as games; and
Installation charges and other one-time fees associated with the service.
Monthly service fees from international and domestic leased lines;
Other wholesale transport services;
Revenues from value-added services; and
One-time connection charges associated with the establishment of service.
Fixed line voice service revenues consist of the following:
a)
b)
c)
d)
e)
f)
Monthly service fees;
Revenues from local, international and national long distance calls made by postpaid, prepaid fixed line voice
subscribers and payphone customers, as well as broadband customers who have subscribed to data packages bundled
with a voice service. Revenues are net of prepaid and payphone call card discounts;
Revenues from inbound local, international and national long distance calls from other carriers terminating on Globe‟s
network;
Revenues from additional landline features such as caller ID, call waiting, call forwarding, multi-calling, voice mail, duplex
and hotline numbers and other value-added features;
Installation charges and other one-time fees associated with the establishment of the service; and
Revenues from DUO and SUPERDUO (Fixed line portion) service consisting of monthly service fees for postpaid and
subscription fees for prepaid.
Broadband
Quarter on Quarter
Cumulative Broadband Subscribers
1
Wireless …………………………...
Wired………………………………..
Total (end of period)…………………..
1
1Q
4Q
2014
2013
1,798,378
392,000
1,653,647
378,255
2,190,378
2,031,902
Year on Year
QoQ
Chang
e
31 Mar
31 Mar
YoY
2014
2013
Change
9%
4%
1,798,378
392,000
1,388,649
352,302
30%
11%
8%
2,190,378
1,740,951
26%
Includes fixed wireless and fully mobile broadband subscribers.
Globe Tattoo Broadband keeps positive momentum going with 12% growth in revenues for the first three
months from P4.2 billion to P4.8 billion as a result of the 26% growth in its subscriber base. Strong
growth in the broadband business resulted from aggressive acquisitions campaigns, attractive pricing
120
offers and product bundles. Quarter-on-quarter, revenues likewise grew by 5% from P4.6 billion last
quarter. Tattoo Broadband‘s sustained growth was mainly due to the improved ARPUs across all
product segments and higher subscriber base for both Tattoo-At-Home and Tattoo-On-The-Go, rising to
2,190,378 subscribers from 2,031,902 last quarter.
The Company continued its commitment to offer broadband differentiated and value priced products.
The widest range of Tattoo Prepaid mobile Wi-Fi devices was made available during the period including
4G mobile Wi-Fi with speed up to 12mbps, connects up to 10 devices for only P1,995; 4G mobile Wi-Fi +
Powerbank which full charge the phone up to 3x for only P3,795 and LTE mobile Wi-Fi with speed up to
42mbps, connects up to 10 devices + Powerbank, which full charge the phone, for only P4,995. Tattoo
Postpaid likewise introduced the best value tablet bundle with no upfront cash out – Samsung Galaxy
Tab 3 + FREE mobile Wi-Fi for P899 per month and Postpaid Tattoo Plan with free LTE stick (Plan999)
or LTE Mobile WiFi (Plan1299). Meanwhile, Tattoo Home Broadband banners its Plan1599 internet
service + landline bundle, now with speed up to 5mbps.
FIXED LINE DATA
Service Revenues (P Million)
Fixed line Data
International …..………………………....
Domestic….… …………………..............
1
Others ..…………………………………
Total Fixed line Data Service Revenues..
1
Quarter on Quarter
1Q
4Q
QoQ
2014
2013
Change
258
629
432
1,319
241
594
407
1,242
7%
6%
6%
6%
31 Mar
2014
Year on Year
31 Mar
YoY
2013
Change
258
629
432
1,319
224
521
366
1,111
15%
21%
18%
19%
Includes revenues from value-added services such as internet, access, data centers and bundled services.
The fixed line data segment continued its revenue growth with P1.3 billion, 19% higher year-on-year
while compared to previous quarter, the increase was 6%. The sustained growth of fixed line data was a
product of the Company‘s continued dedication to expand its portfolio focusing on Globe‘s corporate
clients‘ increasing demand for solutions to address its critical business needs such as sales and
marketing, intercompany communications, database management and data storage. Likewise, the
expansion of the local IT Enabled Service (ITES) industry which includes call centers and Business
Process Outsourcing (BPO) companies has also helped drive the growth of the corporate data business.
FIXED LINE VOICE
Quarter on Quarter
1Q
2014
Year on Year
4Q
QoQ
2013
Change
(%)
31 Mar
31 Mar
YoY
2014
2013
Change
(%)
Cumulative Voice Subscribers 1
Net (End of period) ……………………………
Average Revenue Per Subscriber (ARPU) …
2
ARPU ………………………………………
Average Monthly Churn Rate ..……………....
1
611,743
594,527
3%
611,743
687,775
-11%
367
2.38%
357
3.57%
3%
367
2.38%
309
4.22%
19%
Includes DUO and SuperDUO subscribers
2
Total fixed line voice revenues improved year-on-year due to higher ARPU by 19%. Meanwhile the
quarterly increase was due mainly to increase in subscriber base.
121
OTHER GLOBE GROUP REVENUES
International Long Distance (ILD) Services
Globe Group
Quarter on Quarter
1Q
2014
Year on Year
4Q
QoQ
2013
Change
(%)
31 Mar
2014
31 Mar
YoY
2013
Change
(%)
Total ILD Revenues (P Million) …………………..
2,805
3,004
-7%
2,805
2,839
-1%
Average collection rates for the period (P to US$1)
44.643
43.520
3%
44.643
40.803
9%
610
643
-5%
610
505
21%
562
567
-1%
562
428
31%
48
76
-37%
48
77
-38%
11.63
7.43
11.63
5.56
Total ILD Minutes (in million minutes) …………
Inbound………………………………………………
Outbound.……………………………………………
ILD Inbound / Outbound Ratio (x) ………………….
Both Globe and Innove offer ILD voice services which cover international call services between the
Philippines to more than 200 destinations with over 700 roaming partners. This service generates
revenues from both inbound and outbound international call traffic, with pricing based on agreed
international termination rates for inbound traffic revenues and NTC-approved ILD rates for outbound
traffic revenues.
On a consolidated basis, ILD voice revenues from the mobile and fixed line businesses slightly declined
year on year by 1% and down by 7% quarter-on-quarter to P2,805 million from P3,004 million. The
decline versus last quarter was mainly due to decline in ILD traffic.
Meanwhile, Globe sustained its promotion on OFW SIM packs and the discounted call rate offers such
as IDD Sakto Calls (per-second IDD), TipIDD card, and IDD Tingi – the first bulk IDD service which can
be purchased via registration and through AMAX retailers nationwide. This is available in two
denominations: P20 for 5-minute calls to US, Canada, Hong Kong Singapore and Taiwan, and P30 for 3minute calls to Saudi Arabia, UAE and Kuwait. In addition, The Filipino Seafarer SIM enables Filipino
seafarers around the world to keep in touch with their loved ones back home at cheaper rates for as low
as US$0.20 per minute while sending SMS for only US$0.10 per sms. Subscribers who will avail of the
SIM will get two numbers in one SIM – an international mobile number and a Philippine Globe mobile
number. Globe and TM subscribers calling the Globe Seafarer SIM are only charged at local rates. The
Globe Local UK SIM card alternatively gives Filipinos one affordable rate of only 10 pence for each call
or text sent to Globe or TM number in the Philippines as well as calls and text to all UK networks.
Subscribers also pay only 10 pence for every MB of mobile internet. Moreover, Globe once again
expanded its international footprint with the launch of Globe local Italy SIM last November 24, 2013.
Filipino communities in Italy can now enjoy calls to Globe in the Philippines for just five Euro cents per
minute, the lowest among all Italian mobile operators. This 2014, Globe recently announced the
partnership with Ingenium Outsourcing Services, S.L.U to be able to launch soon the Local Spain SIM
card, which will be the 8th country where Globe would have an international retail presence. Globe Duo
International was further expanded to include Japan with the launch of Duo Japan during the period,
which allows calls from Japan to the Philippines, via a Japanese number assigned to a Globe or TM
mobile number, to be charged on local rates.
122
GROUP OPERATING EXPENSES
For the three months ended, Globe‘s total costs and expenses, including depreciation, amounted to
P
=
18,502 million, down by 7% from last year‘s P
= 19,999 million driven by lower depreciation charges and
decline in interconnect costs which fully offset the increases from all other expense line items. Higher
depreciation in 2013 is mainly due to the accelerated depreciation related to the network modernization
projects. On a sequential basis, total spending declined by 10% primarily across all expense line items
except for subsidy, repairs and maintenance and utilities.
(P Million)
Globe Group
Quarter on Quarter
Year on Year
(Unaudited)
(Unaudited)
1Q
4Q
QoQ
31 Mar
31 Mar
YoY
Change
Change
2014
2013
2014
2013
(%)
(%)
Cost of sales………………………………..
Less: Non-service revenues………………..
Subsidy……………………….....................
2,867
1,130
1,737
2,946
1,573
1,373
-3%
-28%
27%
2,867
1,130
1,737
2,707
1,102
1,605
6%
3%
8%
Interconnect………………………………...
Selling, Advertising and Promotions………
Re-contracting………………………………..
Staff Costs ……………………………………
Utilities, Supplies & Other Administrative
Expenses...
Rent…………………………………………...
Repairs and Maintenance…………………..
Provisions …………………………………..
Services and Others………………………...
Operating Expenses………………………
2,057
1,131
600
1,950
2,304
1,490
718
2,130
-11%
-24%
-16%
-8%
2,057
1,131
600
1,950
2,195
808
489
1,666
-6%
40%
23%
17%
1,145
916
1,089
790
3,019
12,697
1,127
935
911
771
3,263
13,649
2%
-2%
20%
2%
-7%
-7%
1,145
916
1,089
790
3,019
12,697
1,001
840
966
487
2,535
10,987
14%
9%
13%
62%
19%
16%
4,068
5,607
-27%
4,068
7,407
-45%
512
3,556
18,502
733
4,874
20,629
-30%
-27%
-10%
512
3,556
18,502
3,062
4,345
19,999
-83%
-18%
-7%
Depreciation and Amortization…………
Affected by network modernization……
Others………………………………………
Costs and Expenses……………………….
Interconnect
Interconnect charges declined year-on-year and quarter-on-quarter by 6% and 11% respectively due to
lower inter-network traffic on domestic services mainly on Mobile Telephony‘s local voice.
Subsidy
Total subsidy increased by 8% year-on-year to P
= 1,737 million from P
= 1,605 million in same period last
year mainly for Postpaid on account of higher mix of mid to high-end plan subscription (from 51% in
1Q‘13 to 53% in 1Q‘14), strong postpaid mobile gross activations, and the increase in broadband
acquisitions. On a sequential basis, subsidy likewise increased by 27% on the back of increased gross
acquisitions during the period as partly offset by volume rebates pertaining to 2013 handset purchases.
123
Marketing
Selling, advertising and promotions, which account for 8% of total operating expenses and subsidy grew
year-on-year by 40% to P
= 1,131 million this period from P
= 808 million as of March 2013 driven by
increased advertising spend on all business segments and higher commissions following growth in
@Home acquisitions. However, on a sequential basis, costs declined by 24% mainly across all brands
as partly offset by higher commissions. Higher fourth quarter marketing expenses was due to catch up
accruals booked in December on various marketing programs in December.
Re-contracting
Total re-contracting costs as of first quarter, increased by 23% to P
= 600 million from P
= 489 million in the
same period last year. The increase in re-contracting costs is mainly due to the increasing base of recontracting subs who availed of handset upgrade. On a sequential basis, re-contracting cost declined by
16% from P
= 718 million in the fourth quarter. Higher re-contracting cost in the fourth quarter was mainly
due to the launch of various apple products (iPhone 5s and 5c; iPad mini with Retina display; iPad Air).
Staff Costs
Staff costs which accounted for 14% of total operating expenses and subsidy, increased by 17% to
P1,950 million from P
= 1,666 million in 2013 due to average headcount increase (from 5,902 in 2013 to
6,381 in 2014), higher corporate incentives as well as the exercise of employee stock options.
Compared to last quarter, staff costs declined by 8%.
Utilities, Supplies and Other Administrative Expenses
Utilities, supplies and other administrative expenses showed a year-on-year increase of 14% or P
= 144
million and quarter-on-quarter growth of 2% or P
= 18 million mainly to support Globe‘s growing network,
as well as on-off costs to support recovery efforts on Yolanda affected areas.
Rent
Rent expenses which account for 7% of operating expenses and subsidy increased to P
= 916 million
representing 9% year-on-year growth from P
= 840 million in the first three months of 2013, largely on
higher service vehicle leased and increasing IP port requirements, local tielines and co-location fees.
However, first quarter lease expenses registered a 2% decline from P
= 935 million last quarter.
Provisions
This account includes provisions related to trade, non-trade and traffic receivables and inventory.
Overall, total provisions increased by 62% or P
= 303 million higher than same period last year mainly from
trade provisions due to the continued growth in postpaid revenues year-on-year and higher traffic
provisions as cushioned by lower inventory-related provisions. However, compared to the preceding
quarter, total provisions increased by 2%.
Repairs and Maintenance
Repairs and maintenance, which accounted for 8% of total operating expenses and subsidy stood at
P1,089 million, 13% higher against same period last year‘s P
= 966 million and 20% higher quarter-onquarter, given costs related to maintenance agreements for Globe‘s IT system, support facilities and
outside plant equipment.
Services and Others
Services and other expenses which accounted for 24% of total operating expenses and subsidy grew by
19% from P
= 2,535 million in the same period of 2013 to P
= 3,019 million as of first quarter this year. This
124
was mainly attributed to higher professional fees, higher cost per hour of contracted services and
customer contact services largely due to high volume of postpaid calls both regular and high-end
accounts. Costs likewise were driven by higher freight charges and subscriber line installations as partly
countered by lower payments for taxes and licenses. However, on a sequential basis, services and
other expenses declined by 7% from P
= 3,263 million last quarter, given that fourth quarter spend was
higher due to catch-up accruals.
Depreciation and Amortization
Depreciation and amortization expenses dropped year-on-year and quarter-on-quarter by 45% and 27%,
respectively as bulk of the accelerated depreciation charges related to network and IT transformation
projects was booked in 2013. Normal course depreciation charges were likewise lower as some assets
were determined at end-of-useful life at the end of 2013.
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
(P Million)
Financing Costs – net
Interest Expense………………….......
Gain / (Loss) on derivative instruments – net
Swap costs and other financing costs….
Foreign Exchange loss.…..………………..
Quarter on Quarter
(Unaudited)
1Q
4Q
QoQ
Change
2014
2013
(%)
Year on Year
(Unaudited)
31 Mar
31 Mar
2014
2013
YoY
Chang
e (%)
(488)
61
(67)
(73)
(523)
(40)
(67)
(155)
-7%
-254%
1%
-53%
(488)
61
(67)
(73)
(507)
(68)
(65)
(49)
-4%
-190%
3%
48%
(567)
(785)
-28%
(567)
(690)
Foreign Exchange gain ………………….....
Interest Income ………………………….....
Others – net…………………………………....
164
(19)
160
9
2%
-313%
164
(19)
180
6
-18%
-9%
-417%
Total Other (Expenses) Income…………...
(422)
(616)
-31%
(422)
(503)
-16%
Globe Group‘s non-operating charges for the first quarter posted a 16% or P81 million year-on-year
decline to close the period at P422 million following net forex/MTM loss of ₱12M vs. last year‘s loss of
₱117M coupled with lower interest expense due to 17% lower interest bearing loan and lower interest
rate on dollar loans by 1.7%. Likewise, this quarter showed a decline of 31% in non-operating charges
from P616 million last quarter, due mainly to lower forex losses/MTM following 1Q 2014 peso
depreciation against the US$ by ₱1.14 or 3% vs. 4Q 2013 coupled with lower interest expense.
(See related discussion on derivative instruments and swap costs in the Foreign Exchange and Interest
Rate Exposure section).
125
LIQUIDITY AND CAPITAL RESOURCES
Globe Group
31 Mar
2014
31 Dec
2013
YoY
change (%)
160,029
69,884
39,667
159,079
69,301
41,639
1%
1%
-5%
Debt to Equity (Net) ………………………………………….
Total Debt to Total Capitalization (Book) …………………….
1.91
2.23
12.92
1.76
1.60
0.64
1.90
2.83
12.54
1.66
1.49
0.62
Total Debt to Total Capitalization (Market) ...………………...
0.24
0.24
Total Assets ……………………………………………………
2
Total Debt ……………………………………………………..
Total Stockholders‘ Equity ……………………………………
Total Debt to EBITDA ………………………………………...
Debt Service Coverage…………………………………………
Interest Cover (Gross) …………………………………………
Debt to Equity (Gross) ………………………………………...
1
1
2
Total debt is composed of e.g. interest bearing debt, notes payable and long term debt.
Globe‘s balance sheet and cash flows remain strong with ample liquidity and gearing comfortably within
bank covenants albeit higher year-on-year with the additional debt raised as a result of Globe‘s
transformation and modernization program.
Globe Group‘s consolidated assets as of 31 March 2014 amounted to P160,029 million compared to
P159,079 million as of end 2013. Consolidated cash, cash equivalents and short term investments
(including investments in assets available for sale and held to maturity investments) was at P6,503
million at the end of first quarter this year compared to P7,421 million as of end-December 2013.
The Company‘s gearing levels have been increasingly optimized over the past few years with the raised
dividend payouts and higher proportion of debt to total capitalization. Globe ended the first three months
of the year with gross debt to equity ratio on a consolidated basis at 1.76:1 and is well within the 2:1 debt
to equity limit dictated by Globe‘s debt covenants. Meanwhile net debt to equity ratio was at 1.60:1 as of
end-March 2014 and 1.49:1 as of end December 2013.
Globe's current ratio was at 0.64:1 as of 31 March 2014 and 0.68:1 as of 31 March 2013, which are at
par with industry standards. While Globe's average current ratio was below the SEC's minimum of 1:1,
Globe believes it has more than sufficient cash flows from operations to meet its debt maturities,
currently and prospectively.
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;
1
Debt service coverage exceeding 1.3 times; and
2
Secured debt ratio not exceeding 0.2 times.
As of 31 March 2014, Globe is well within the ratios prescribed under its loan agreements.
1
Debt service coverage ratio is defined as the ratio of EBITDA to required debt service, where debt service includes subordinated
debt but excludes shareholder loans.
2
Secured debt ratio is defined as the ratio of the total amount for the period of all present consolidated obligations for payment,
whether actual or contingent which are secured by Permitted Security Interest as defined in the loan agreement to the total
amount of consolidated debt. Globe has no secured debt as of 31 March 2014.
126
Consolidated Net Cash Flows
Globe Group
(P Million)
31 Mar
2014
(Unaudited)
31 Mar
2013
(Unaudited)
YoY
change (%)
Net Cash from Operating Activities……………………………..
Net Cash from Investing Activities……………………………...
8,546
(4,288)
9,153
(6,637)
-7%
-35%
Net Cash from Financing Activities……………………………..
(5,223)
(2,582)
102%
Net cash flows provided by operating activities as of end-March this year stood at P8,546 million, down
by 7% year on year.
Meanwhile, net cash used in investing activities amounting to P4,288 million was lower by 35%.
Consolidated cash capital expenditures as of end of first quarter this year amounted to P
= 4,688 million,
down by 32% from last year‘s P
= 6,917 million.
Globe Group
(P Million)
Capital Expenditures (Cash) ……………………………………..
Increase in Liabilities related to Acquisition of PPE
& capitalized Asset Retirement Obligations and borrowing cost…
1
Total Capital Expenditures ……………………………………
Total Capital Expenditures / Service Revenues(%)...……………
31 Mar
2014
4,688
31 Mar
2013
6,917
YoY change
(%)
1,188
974
22%
5,876
7,891
-26%
25%
37%
-32%
1
Consolidated capital expenditures include property and equipment, intangibles and capitalized borrowing costs acquired as of
report date regardless of whether payment has been made or not.
Consolidated net cash from financing activities increased by 102% year on year, driven by higher
repayments of borrowings, dividends and interest payments. Consolidated total debt, likewise, slightly
increased by 1% from P
= 69,301 million in year-end 2013 to P
= 69,884 million this period.
44% of USD consolidated loans have been effectively converted to P via USD165 million in currency
hedges. After swaps, effectively 13% of total debt are denominated in USD as of end-March 2014.
Below is the schedule of debt maturities for Globe for the years stated below based on total outstanding
debt as of 31 March 2014:
Year Due
2014………….…………………………………………………………………………...
2015.……………………………………………………………………………………...
2016………………………………………………………………………………………
2017 through 2023 ………………………………………………………………………
Total
Principal *
(US$ Mn)
171
137
169
1,091
1,568
* Principal amount before debt issuance costs.
On March 6, 2013, Globe Telecom signed a US$ 75 million 3-year term loan with floating interest rate
with Bank of Tokyo - Mitsubishi UFJ, Ltd., Singapore Branch as lender. The purpose of the loan is to
fund Globe Telecom‘s capital expenditures.
127
On March 22, 2013, Globe Telecom signed a US$ 120 million 7-year term loan with floating interest rate
with Metrobank as lender to finance Globe Telecom‘s capital expenditures.
On July 17, 2013, the Globe Group issued P
= 7,000.00 million fixed rate bond. The amount comprises P
=
4,000.00 million and P
= 3,000.00 million bonds due in 2020 and 2023, with interest rate of 4.8875% and
5.2792%, respectively. The net proceeds of the issue shall be used to partially finance the Globe Group‘s
capital expenditure requirements in 2013.
On July 29, 2013, Globe Telecom signed a US$ 40 million 3-year term loan with floating interest rate with
Mizuho Bank Ltd. as lender to prepay and refinance certain debts.
On December 4, 2013, Globe Telecom signed a P
= 7,000.00 million 7-year term loan credit facility with
fixed interest rate with Land Bank of the Philippines as lender. The proceeds of the loan shall be used to
partially finance Globe Telecom‘s general financing and corporate requirements for capital expenditures.
On April 8, 2014, further to the approval of BOD dated February 10, 2014 on the amendment of Articles of
Incorporation to reclassify unissued common and voting preferred shares into non-voting preferred
shares,
the
BOD
approved
the
issuance,
offer
and
listing
of
up
to
20 million non-voting preferred shares, with an issue volume of P
= 10.00 Billion. The non-voting preferred
shares shall be redeemable, non-convertible, non-voting, cumulative and may be issued in series. The
key features of the Non-Voting Preferred Shares include:




Dividends – To be determined by the Board of Directors at the time of issue
Liquidation Preference - The Non-Voting Preferred Shares shall rank ahead of the Common
Shares and equally with the Voting Preferred Shares.
Redemption - The Non-Voting Preferred Shares shall be redeemable at the Corporation‘s option
at such times and price(s) as may be determined by the Board of Directors at the time of issue,
which price may not be less than the par value thereof plus accrued dividends.
Pre-emptive Rights - The Non-Voting Preferred Shares shall not have any pre-emptive rights
over any sale or issuance of any share in the Corporation‘s capital stock.
Equity as of March 31, 2014 was down by 5% from P41,639 million to P39,667 million. Globe‘s capital
stock consists of the following:
Preferred Shares
Preferred stock at a par value of P5 per share of which 158 million shares are outstanding out of a
total authorized of 250 million shares.
Preferred stock has the following features:
a. Issued at P5 par;
b. Dividend rate to be determined by the BOD at the time of Issue;
th
c. One preferred share is convertible to one common share starting at the end of the 10 year of
the issue date at a price to be determined by the Globe Telecom‘s BOD at the time of issue
which shall not be less than the market price of the common share less the par value of the
preferred share;
th
d. Call option – Exercisable any time by Globe Telecom starting at the end of the 5 year from
issue date at a price to be determined by the BOD at the time of the issue;
e. Eligibility of Investors – Only Filipino citizens or corporations or partnerships wherein 60% of the
voting stock of voting power is owned by Filipino;
f. With voting rights;
g. Cumulative and non-participating;
h. Preference as to dividends and in the event of liquidation; and
i. No preemptive right to any share issue of Globe Telecom, and subject to yield protection in case
of change in tax laws.
The dividends for preferred shares are declared upon the sole discretion of the Globe Telecom‘s
BOD.
128
To date, none of the preferred shares have been converted to common shares.
Common Shares
Common shares at par value of P50 per share of which 132 million are issued and outstanding out
of a total authorized of 180 million shares.
Cash Dividends
The dividend policy of Globe Telecom as approved by the Board of Directors is to declare cash
dividends to its common stockholders on a regular basis as may be determined by the Board. The
dividend payout rate starting 2006 is approximately 75% of prior year‘s net income payable semiannually in March and September of each year. This is reviewed annually, taking into account Globe
Telecom‘s operating results, cash flows, debt covenants, capital expenditure levels and liquidity.
On 10 February 2014, the Board of Directors approved the declaration of the 1st semi-annual cash
dividend of P37.50 per common share, payable to shareholders on record as of 26 February 2014. Total
dividends of about P4.97 billion were paid on 20 March 2014.
Consolidated Return on Average Equity (ROE) registered at 29% as of end-March 2014, compared to
6% in the same period in 2013 using net income and based on average equity balances for the year
ended. Using annualized core net income excluding the effects of accelerated depreciation on net
income, return on average equity for the first quarter this year was at 33% compared to 28% of 2013.
Accordingly, consolidated basic earnings per common share were P22.15 and P4.88, while consolidated
diluted earnings per common share were P22.13 and P4.88 as of end-March 2014 and 2013,
respectively.
FINANCIAL RISK MANAGEMENT
FOREIGN EXCHANGE EXPOSURE
Foreign exchange risks are managed such that US$ inflows from operations (transaction exposures) are
balanced or offset by the net US$ 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 currency-linked
4
revenues was at 17% of total gross service revenues for the periods ended 31 March 2014 and 2013.
4
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
129
In contrast, Globe‘s foreign-currency linked expenses were at 9% and 11% of total operating expenses
for the same periods ended, respectively.
The US$ flows are as follows:
US$ and US$ Linked Revenues
US$ Operating Expenses
US$ Net Interest Expense
March 2014
P3.84 billion
P0.93 billion
P0.06 billion
Due to these net US$ inflows, an appreciation of the Peso has a negative impact on Globe‘s Peso
EBITDA. Globe occasionally enters into forward contracts to hedge against a peso appreciation. A total
of US$4.5 million of contracts remain outstanding as of end-March 2014. The mark-to-market of the
outstanding forwards stood at a gain of P1.4 million as of end-March 2014.
st
There were no realized gains or losses from forward contracts for the 1 quarter of 2014.
Translation Exposures
Globe also has US$ assets and liabilities which are revalued at market rates every period. These are as
follows:
US$ Assets
US$ Liabilities
Net US$ Liability Position
March 2014
US$189 million
US$576 million
US$387 million
For accounting purposes, the foreign currency assets and liabilities are revalued at the exchange rate at
the end of each reporting period. Given the net US$ liability position, a depreciation of the peso results
in a revaluation or forex loss in our P&L. As of March 2014, the Philippine Peso stood at P44.809 to the
US dollar, a weakening versus the 2013 year-end rate of P44.398. Due to the weakening peso, the
Globe Group charged a total of P73 million in net foreign exchange losses to current operations for the
first quarter of 2014.
In April 2013, Globe entered into cross currency swaps amounting to US$125 million in April 2013 and
US$40 million in February 2014 to hedge the FX and interest rate risk on some of its US$ loans. The
MTM of the swap contracts stood at a gain of P595 million as of end-March 2014.
Globe also entered into a short-term US$30 million swap contract (sell US$ spot, buy US$ forward), to
manage its US$ and P cash flow requirements.
INTEREST RATE EXPOSURE
Interest rate exposures are managed via targeted levels of fixed versus floating rate debt that are meant
to achieve a balance between cost and volatility. Globe‘s policy is to maintain between 44-88% of its
peso debt in fixed rate, and between 31-62% of its US$ debt in fixed rate.
As of end-March 2014, Globe has a total of US$26 million in US$ interest swaps, P3.8 billion in P
interest rate swaps and $165 million in cross currency swaps that were entered into contracts to achieve
these targets. The US$ and Peso swaps fixed some of the Company‘s outstanding floating rate debts
with quarterly or semi-annual payment intervals up to April 2020.
As of end-March 2014, 66% (excluding short-term debt) of peso debt is fixed, while 59% of US$ debt is
fixed after swaps.
130
The MTM of the interest swap contracts (not including the currency swap contracts) stood at a loss of
P88 million as of end-March 2014.
CREDIT EXPOSURES FROM FINANCIAL INSTRUMENTS
Outstanding credit exposures from financial instruments are monitored daily and allowable exposures
are reviewed quarterly.
For investments, the Globe Group does not have investments in foreign securities (bonds, collateralized
debt obligations (CDO), collateralized mortgage obligations (CMO), or any instruments linked to the
mortgage market in the US). Globe‘s excess cash is invested in short term bank and SDA deposits.
The Globe Group also does not have any investments or hedging transactions with investment banks.
Derivative transactions as of the end of the period are with large foreign and local banks. Furthermore,
the Globe Group does not have instruments in its portfolio which became inactive in the market nor does
the company have any structured notes which require use of judgment for valuation purposes.
VALUATION OF DERIVATIVE TRANSACTIONS
The company uses valuation techniques that are commonly used by market participants and that have
been demonstrated to provide reliable estimates of prices obtained in actual market transactions. The
company uses readily observable market yield curves to discount future receipts and payments on the
transactions. The net present value of receipts and payments are translated into Peso using the foreign
exchange rate at time of valuation to arrive at the mark to market value. For derivative instruments with
optionality, the company relies on valuation reports of its counterparty banks, which are the company‘s
best estimates of the close-out value of the transactions.
Gains (losses) on derivative instruments represent the net mark-to-market (MTM) gains (losses) on
derivative instruments. As of 31 March 2014, the MTM value of the derivatives of the Globe Group
amounted to a gain of P520 million while net gain on derivative instruments arising from changes in
MTM reflected in the consolidated income statements amounted to P61 million.
131
2013 FINANCIAL AND OPERATIONAL RESULTS
Globe Group
For the Year Ended
31-Dec
31-Dec
YoY
2013
2012
Change
(%)
Mobile ………………………………………………………….....
Broadband……………………………………………………...….
Fixed line Data………………………………………………...…..
Fixed line Voice ……………………………………………….…
Costs and Expenses ………………………………………………...
Cost of Sales…………………………………………………………
1
Operating Expenses ……………………………………………..
EBITDA …………………………………………………………………
EBITDA Margin………………………………………………………..
Depreciation……………………………………………………………
Others…………………………………………………………………
EBIT …………………………………………………………………….
EBIT Margin……………………………………………………………
1
Non-Operating Charges ……………………..……………………..
1
Net Income After Tax (NIAT) ……………………………………..
2
Core Net Income …………………………………………………….
95,141
90,500
72,764
10,440
4,691
2,605
4,641
58,627
9,953
48,674
36,514
40%
27,478
9,066
18,412
9,036
9%
2,172
4,960
11,617
86,446
82,742
67,189
8,721
4,167
2,665
3,704
51,432
7,679
43,753
35,014
42%
23,584
5,080
18,504
11,430
13%
1,678
6,845
10,264
10%
9%
8%
20%
13%
-2%
25%
14%
30%
11%
4%
17%
78%
-21%
29%
-28%
13%
1
2012 operating expenses/ non-operating charges have been restated to reflect the adoption of amendments to PAS 19.
Core net income is net income after tax (NIAT) but excluding foreign exchange and mark-to-market gains (losses), and nonrecurring items
2

Full year consolidated service revenues once again reached a historic-high, registering at P90.5
billion from P82.7 billion last year due to the continued positive growth of Globe‘s mobile, broadband,
and fixed line data businesses. Mobile revenues were up by 8% from last year, still led by Globe
Postpaid and the Company‘s mass market brand TM, which grew by 18% and 8%, respectively.
The increase in mobile revenues was supported by the expansion in mobile subscriber base, which
increased 16% year-on-year to 38.5 million from 33.1 million last year. Broadband and fixed line
data revenues likewise posted a 20% and 13% growth as against last year's levels, respectively, as
the cumulative customer base continued to grow year-on-year.

Total operating expenses and subsidy increased 13% year-on-year to P54.0 billion from P47.7
billion, driven by higher subscriber acquisition and re-contracting costs, following the sustained
postpaid subscriber acquisition and retention efforts with the launch of the Best-Ever MySuperplan in
2013. Other drivers for the increase in operating expenses were higher trade provisions and staffrelated costs, and services expenses, all of which were in support of the growing subscriber and
network base.
132

Full year 2013 consolidated EBITDA stood at P36.5 billion, up by 4% or P1.5 billion against last
year. Full year EBITDA margin stood at 40%. Overall revenue gains fully covered for the overall
upsurge in expenses.

Total depreciation expenses increased by 17% year-on-year driven by the accelerated depreciation
charges related to the ongoing network modernization and IT transformation programs. Excluding
the accelerated depreciation costs related to the network and IT upgrade, depreciation expenses
would have remained flat year-on-year.

Non-operating charges grew by 29% or P494 million driven by foreign exchange and mark-to-market
losses, which fully offset the gains posted last year coupled with higher swap costs. These were
slightly mitigated by the higher interest income generated from the BTI loan receivables and lower
interest expenses due to last year‘s one-time pre-termination costs on Globe‘s retail bonds.

The Company‘s full year consolidated net income after tax reached close to P5.0 billion, 28% or
P1.9 billion lower compared to 2012 level, as the EBITDA growth and higher interest income were
fully offset by higher foreign exchange and mark-to-market losses and increased accelerated
depreciation costs related to the transformation projects. Excluding the non-recurring accelerated
depreciation expenses and foreign exchange and mark-to-market gains and losses, core net income
after tax reached P11.6 billion as of end 2013, which is 13% or P1.4 billion higher than end of 2012.

Total full year cash capital expenditures stood at about P29.0 billion, 44% above last year's level of
P20.1 billion. Globe‘s ongoing network and IT transformation programs comprised 25% of total cash
capital expenditures. Globe continues to embark on its network and IT modernization programs,
building more sites to adapt to the changing landscape in the country‘s key business districts,
boosting capacity and enhancing the overall network performance. As of end 2013, 90% of the
network is already on 4G HSPA+ providing faster mobile browsing experience for Globe‘s
subscribers. To support the requirements of its subscribers for 2G, 3G and4G services, Globe has a
total of 20,656 base stations, including over 7,800 4G base stations.

On top of the transformation programs being undertaken, Globe continued to invest in traditional
services, particularly in building more sites and incorporating needed in-building solutions to address
coverage blind spots brought about by the changing skyline in urban areas. These investments
were meant to address requirements of Globe‘s core services (voice and SMS) as well as data.
Data remained a key investment area for Globe in 2013, with approximately 26% of the total CAPEX
for the year, given the growth in demand from subscribers across the different segments. These
data-related investments include spends on LTE deployment and fixed broadband roll-out, both of
which were considered out-of-scope in Globe‘s modernization programs. Furthermore, Globe spent
close to P1.0 billion in investments in international cable systems in 2013, again aligned with the
increasing need for data connectivity for Globe‘s mobile, broadband and enterprise segments.

For 2014 the Company expects the market to be more challenging and competition to remain
intense but more rationale on the ground. Against this environment, the Company sees
consolidated revenues to increase by mid to high single digit from 2013 level. Near-term earnings,
meanwhile, will continue to be impacted by (1) non-recurring costs of approximately P1.0 billion
related to the purposeful delay of Phase 2 migration of our IT transformation program, (2) trailing
accelerated depreciation costs of approximately P1.5 billion for the balance of the assets to be
replaced by the modernization, and (3) additional interest expenses from additional debt related to
2014 CAPEX. Moving forward, EBITDA margin is expected to hover at the high-30s to low-40s,
given the continuous growth of our postpaid business and the necessary investments in subscribers
needed to support this growth and the increasing contribution of lower-margin data-related products.
In terms of the balance sheet, Globe‘s gearing ratios are expected to remain elevated in 2014, but
are seen to remain well within loan covenants.
The Company expects its balance sheet and
financial position to remain strong, with dividend pay-outs sustained at competitive levels.
133

Regular cash dividends paid out in 2013 amounted to P8.9 billion, representing 87% of 2012 core
net income. This was in line with the Company‘s dividend policy of distributing 75% to 90% of prior
year‘s core net income. Total dividend payout of P67 per common share translates to a dividend
yield of 6.2% based on beginning of 2013 share price. In August 2013, the Company amended its
frequency of cash dividend distribution from semi-annual to quarterly beginning 2014. In December
2013, Globe announced that the affectivity of the said change in distribution of cash dividend will
start on the third quarter of 2014. The amended frequency in the payouts will provide the Company
with better cash planning and liquidity management and at the same time ensure a more consistent
dividend distribution to the shareholders.

For 2014, Globe has earmarked about US$600 to US$650 million in capital expenditures with
approximately one third for trailing CAPEX payments related to the transformation initiatives.
Another one third of the CAPEX is expected to be incurred for the expansion and capacitation of
Globe‘s data network, including continued investments in LTE and fixed broadband. The remaining
CAPEX balance is to be invested for traditional services, to enhance Globe‘s network performance
and to improve customer experience through additional sites and in-building solutions.
GROUP OPERATING REVENUES BY SEGMENT
For the Years Ended
Operating Revenues By Businesses (P Million)
31-Dec
31-Dec
YoY
2013
2012
Change
(Audited)
(Audited)
(%)
Mobile
Service Revenues …………………………………………………..
Non-Service Revenues………………………………………………
76,597
72,764
3,833
69,963
67,189
2,774
9%
8%
38%
Service Revenues *…………………………………………………..
Total Operating Revenues…………………………………………...
18,544
17,736
808
95,141
16,483
15,553
930
86,446
13%
14%
-13%
10%
The Globe Group closed the year with total net operating revenues of P95.1 billion, 10% above prior
year‘s P86.4 billion.
Mobile revenues, which accounted for 80% of consolidated service revenues as of end-December,
increased to P72.8 billion, up by 8% from last year‘s level of P67.2 billion. The mobile business
continued its growth trend driven mainly by higher revenue contributions from mobile browsing and other
value-added services and unlimited SMS. Likewise, growth was complemented by the strong subscriber
growth due to the sustained acquisitions of the Postpaid brand during the first half of the year and Globe
Prepaid‟s and TM‟s sharp growth in the fourth quarter.
Globe‘s broadband businesses flourished in 2013, registering sharp growths on both revenues (+20%)
and customer base (+ 22%) year-on-year. Globe ended the year with over 2 million broadband
subscribers, with the fixed DSL and wireless broadband segments registering growths of 11% and 24%,
respectively. The competitiveness and affordability of the various offers launched throughout the year
and the expanded pervasiveness of our fixed and wireless broadband network contributed to the robust
performance in the year just ended.
Mobile non-service revenues, on the other hand, were up by 38% from previous year‘s level of P2.8
billion to about P3.8 billion in 2013 driven by sales on robust postpaid gross acquisition. Fixed line and
broadband non-service revenues likewise dropped by 13% year-on-year.
134
MOBILE BUSINESS
For the Years Ended
Mobile Service Revenues (P Million)
Service
1
Voice ….…………………………………………………………...
2
SMS
2
Mobile Service Revenues *………………………………………..
31-Dec
31-Dec
YoY
2013
2012
Change
(Audited)
(Audited)
(%)
32,367
28,794
11,603
72,764
32,446
26,552
8,191
67,189
8%
42%
8%
* 2012 voice and data (sms, mobile browsing and other data) revenues have been restated for comparability.
1
a)
b)
c)
d)
e)
f)
loaded;
including currency exchange rate adjustments (CERA) net of loyalty discounts credited to subscriber billings; and
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; and
Mobile service revenues of GTI.
Revenues from (a) to (f) are reduced by any payouts to content providers.
2
Mobile browsing and other data service revenues consist of local and international revenues from value-added services such as
mobile internet browsing and content downloading, mobile commerce services, other add-on VAS and service revenues of GXI
and EGG,, net of any interconnection or settlement payouts to local and international carriers and content providers.
Mobile Voice
Mobile voice revenues, which accounted for 44% of total mobile service revenues, was relatively
unchanged as of end of 2013, as the drop in international long distance, voice-over-internet protocol
(VOIP), regular domestic voice and roaming services was partly offset by the increase in unlimited and
bulk domestic voice subscriptions. Against the third quarter however, mobile voice registered a 4%
increase due to seasonality.
Globe remains the only operator in the country that offers per-second voice charging with Globe‘s Super
second. The Company continues to provide attractive and affordable bulk voice offers such as Tawag
236 for 20-minute consumable calls for only P20 for Globe Postpaid and Globe Prepaid subscribers and
TM‟s TodoTawag 15/15 service for 15-minute on-net call for only P15. TM subscribers may also
subscribe to SuliTawag for only P5 for 3-minute Globe and TM network calls and TM Dagdag Call worth
P5 which is an add-on service to subscribers registered to TM‘s text promotions that provides 3-minute
on-net calls. Likewise, GoCall100 was made available via GoSakto which provide Globe Prepaid
subscribers 500 minutes of on-net calls to Globe/TM for only P100 for 7 days.
Meanwhile, for Filipinos who wish to stay connected with their loved ones abroad, Globe continues to
offer its pioneering per-second charging for international voice calls, IDD Sakto Calls for both Globe
Postpaid and Globe Prepaid subscribers. Globe Prepaid‟s GoTipIDD service remains to be the lowest
per-minute IDD rates in the market. In addition, Globe also provides a bucket IDD service to popular
135
and selected overseas destinations with its IDD Tingi promotion, while offering its TipIDD card at various
Globe distribution channels. The Company‘s international voice services also include Super IDD, an
unlimited call service for 24 hours to select destinations worldwide, and Globe Duo International, which
provides registered Globe Postpaid and Globe Prepaid subscribers with virtual US landline numbers
which they can use to communicate with their loved ones in the USA. Families and friends in the USA in
turn may call their loved ones back in the Philippines and be charged at domestic US rates. This service
was further expanded to cover Korea, Canada and UK with the launch of Globe DUO Korea, Globe DUO
Canada and Globe DUO UK where it assigns a Korean, Canadian or UK number to a Globe/TM mobile
number in the Philippines which subscribers may use to call friends and loved ones in Korea, Canada
and UK directly while enjoying local (Korea/Canada/UK) domestic calling rates. In the same manner,
incoming calls from Korea, Canada and UK to Duo numbers registered in the Philippines are also
charged at local Korean, Canadian and UK rates. Globe Duo Korea, Globe Duo Canada and Globe Duo
UK are available to Globe Postpaid, Globe Prepaid, and TM subscribers.
browsing services through its combo packages. For Globe Prepaid, subscribers have the choice to
avail of All-Unli Trio60, SuperUnliAllTxt 25, SuperAll Txt 20, Super Combo 20 and All Net Combo.
Another option that Globe Prepaid subscribers may choose to avail of is GoUnli, which provides
unlimited SMS to all networks as well as unlimited on-net calls, and unlimited use of Facebook. The
Company likewise offers Immortal Trio to Globe Prepaid subscribers to allow 50 on-net SMS, 5 allnetwork texts and 5 minutes of on-net calls for only P25 per subscription. Globe Prepaid subscribers
also have the option to subscribe to UnliTingi to get unlimited all-network texts, unlimited on-net calls,
and unlimited mobile browsing valid for 1 hour for only P5. SuperUnli, which allows unlimited calls and
SMS within the Globe and TM networks, is also available for one day subscription for Globe Prepaid
subscribers for only P25. Another industry-shaking innovation from Globe Prepaid is the launch of
GoSakto early this year which empowers the subscribers and gives them the flexibility to tailor-fit their
prepaid promo based on their calling, texting and surfing needs for the day, week or month. On top of
this, subscribers can even name the offer they created and share it among their friends on Facebook to
allow their friends to register to the same promo. Additionally, Globe, in partnership with Viber, launched
several value-for-money service offerings in order to give its Globe Prepaid subscribers a richer mobile
experience. GoUnli25, which offers the all-time favorite unlimited on-net voice and texts was made even
better with FREE unlimited Viber Chat offered at the same price of P25. Likewise, Globe Prepaid‟s
GoUnli30 which allows unlimited all-network SMS, unlimited on-net call and unlimited Facebook valid for
a day was further improved during the third quarter of 2013 to include the best Chat Apps for the same
price of P30. Globe Prepaid subscribers can call their friends abroad using Viber, enjoy real-time IM
conversations via FB Messenger, send cute, animated stickers using Kakao, and even leave
personalized walkie-talkie voice messages using WeChat! Other chat apps like Whatsapp, Line and
GMessage can also be used for free with NO WIFI needed.
For TM on the other hand, subscribers can choose from a wide array of unlimited and bucket offers
which will best fit their budget and lifestyle. Among the Unlimited Promo, TM subscribers can avail of
UnliCombo for as low as P15 for 1 day if they want to get unlimited on-net calls from 11PM to 6AM the
following day and unlimited on-net SMS for 24 hours. Alternatively, they can subscribe to UnliCombo20
if they want to get unlimited on-net calls from 10 PM to 5 PM the following day and unlimited on-net SMS
for 24 hours. Subscribers may also opt to choose a 2-day unlimited on-net SMS with Astigtxt15.
Bucket text and call services are likewise available for as low as P10 for an unlimited on-net SMS and
bulk on-net voice calls with AstigCombo10. Astigcombo15 is also available which gives unlimited on-net
texts and 30 minutes on-net calls for P15 a day. TM subscribers may avail of Combo15 to get unlimited
on-net SMS, 50 all-network text service, and 10 consumable minutes within the TM and Globe networks
for 2 days as well as Combo20 which offer unlimited on-net texts to Globe/TM plus 50 All-net texts and
20 minutes calls to Globe/TM for only P20. On top of this, TM subscribers can now extend for another
24 hours their favorite TM promo for only P5.
136
Mobile SMS
Mobile SMS which accounted for 40% of total mobile service revenues, closed the year at P28.8 billion,
higher by 8% from P26.6 billion of end 2012, driven by increases from unlimited SMS subscriptions
mitigating the decline in regular, bucket SMS and international SMS. On a sequential basis, mobile SMS
revenues increased by 4%, due to normal seasonal uplifts in the fourth quarter of the year.
Globe showcases a comprehensive line up of mobile SMS services ranging from unlimited and bucket
text services to combo voice, SMS and surf promotions. Globe continues to provide its prepaid
subscribers with all-day unlimited on-net SMS with UnliTxt and AstigTxt, respectively. Globe Postpaid
and Globe Prepaid subscribers may get 30 days of unlimited on-net text service by subscribing to
SuperTxt. TM subscribers can likewise subscribe to other variants of the AstigTxt offering for unlimited
on-net SMS valid for 2 days, 3 days, or 5 days. For on-net bucket SMS offers, Globe continues to
provide SuliTxt which allows 100 and 25 text messages for a single day subscription. The Company
also offers all-network text services such as My SuperTxt All, an unlimited text service for 30 days
available for postpaid subscribers and UnliTxtAll20 for a 1-day unlimited SMS to all networks for TM
subscribers. All network bucket text services are likewise available with Globe Prepaid‟s SuperAllTxt for
250 SMS and TM‘s AstigTxtAll for 150 SMS, both valid for a day. Meanwhile, in response to the
market‘s clamor for prepaid offers with longer validity periods, Globe Prepaid likewise introduced via
GoSakto GoUnlitxt49 which offer its subscribers unlimited on-net texts to Globe/TM for only P49. TM
subscribers may avail of Combo10 and Combo15 to get unlimited on-net SMS, 50 all-network text, and
10 consumable minutes to TM and Globe subscribers.
Mobile browsing & other data revenues which accounted for 16% of total mobile service revenues
increased to P11.6 billion as of end 2013, up 42% from P8.2 billion of 2012, driven by the continuous
demand for data services and the popularity of data-driven products and applications, the increased
pervasiveness of Globe‘s 3G, HSPA+ and LTE networks and the proliferation of data-enabled
smartphones. On a sequential basis, mobile browsing & other data revenues declined by 5%, due to the
launch of Globe‘s Free Facebook campaign in the fourth quarter of the year. The promotion was part of
Globe‘s mobile data strategy to provide seamless customer experience and seed the habit of using
mobile internet over Globe‘s expanded 3G, HSPA+ and LTE networks. Despite the near-term impact to
revenues, Globe‘s registered mobile data service users almost doubled during the three-month period, a
significant index in seeding the habit of internet access through smartphones over the wireless networks.
Globe‘s mobile browsing services includes unlimited chatting, downloading, emailing, and surfing offers
to its Globe Postpaid and Globe Prepaid subscribers with its add-on data plan SuperSurf for as low as
P50 for 1 day. The Company also offers consumable mobile browsing for as low as P15 for 1 hour with
Prepaid Power Surf for its Globe Prepaid and TM subscribers. Prepaid and Postpaid subscribers can
avail of different Power Surf variants: 50MB for only P99, 300 MB for only P299 and 1GB for only P499.
All Power Surf plans are automatically bundled with the Globe No Bill Shock Guarantee, so subscribes
who exceed their monthly MB allocations will never pay more than P999. For unlimited access to
Facebook, Super Facebook and TM Astig Facebook are available for only P10 a day for its Globe
Prepaid and TM subscribers. Meanwhile, Globe and TM Prepaid subscribers who want a full Viber
experience with unlimited high-definition voice calls and unlimited chat can avail of Viber20 for P20 a day
and those who want unlimited Viber chat only can either avail of Viber10, a one day variant for only P10
or Viber30 for five days unlimited Viber chat for P30. Prepaid subscribers who just want unlimited
access to messaging applications (Viber, Whatsapp, Line, FB Messenger, Kakao etc.) may opt to
register to Unlichat25 for only P25.
For BlackBerry® users, the Company continues to offer Super Surf for BlackBerry® Max for all-in
unlimited BlackBerry® services for as low as P50 a day. Globe also provides unlimited use of push
email applications such as Yahoo! Mail, GMAIL, MSN and any POP3 or IPOP email account with its
add-on data service BlackBerry® Messaging. The Company also provides unlimited access to social
networking applications with its BlackBerry® Social offering of P299 valid for 30 days. For unlimited use
137
register to BlackBerry® Chat.
The key drivers for the mobile business are set out in the table below:
For the Year Ended
31-Dec
31-Dec
2013
2012
Cumulative Subscribers (or SIMs) Net (End of period)………..
1
Globe Postpaid ……………………………………………………….
38,475,130
2,025,538
33,119,035
1,734,468
YoY
Change
(%)
16%
17%
Prepaid .………………………………………………………………...
Globe Prepaid ………………………………………………………
TM ……………………………………………………………………
36,449,592
17,836,441
18,613,151
31,384,567
16,440,142
14,944,425
16%
8%
25%
Net Subscriber (or SIM) Additions………………………………...
Globe Postpaid . ……………………………………………………….
5,356,095
291,070
3,078,635
279,762
74%
4%
Prepaid .………………………………………………………………...
Globe Prepaid ………………………………………………………
TM ……………………………………………………………………
5,065,025
1,396,299
3,668,726
2,798,873
977,710
1,821,163
81%
43%
101%
1,199
1,191
1%
Prepaid
Globe Prepaid………………………………………………………..
TM……………………………………………………………………..
141
85
150
92
-6%
-8%
Globe Postpaid………………………………………………………....
7,473
8,432
-11%
100%
69%
2
ARPU
Globe Postpaid ………………………………………………………
Prepaid
Globe Prepaid………………………………………………………..
TM……………………………………………………………………..
Globe Postpaid…………………………………………………………
40
27
20
16
1.9%
1.8%
Prepaid
Globe Prepaid………………………………………………………..
TM……………………………………………………………………..
5.7%
6.6%
5.6%
6.2%
1
2013. Mobile telephony revenues are reflected under “Mobile Service Revenues” while wireless broadband revenues are
included under “Broadband.”
2
Globe closed the year with a total mobile subscriber base of 38.5 million, up 16% from 33.1 million
subscribers last year. Fourth quarter‘s gross subscriber acquisitions registered a quarterly-high of 8.8
million subscribers, 19% higher than last quarter, steered by the record acquisitions of the Company‘s
138
prepaid (Globe Prepaid) and mass market brands (TM). Combined, Globe Prepaid and TM gross
acquisitions comprised 98% of acquired SIMs during the period. The slowdown in postpaid acquisitions
in the fourth quarter was fully offset by the increase in gross additions of our prepaid segments, boosted
in part by the market relevant promotions we launched during the quarter, including the Free Facebook
campaign. Despite the elevated churn rate as of end December of 2013 of 5.95% from 5.69% of 2012,
full year net incremental subscribers leapt to 5,356,095, 74% higher than 2012 level of 3,078,635 net
additions.
Globe Postpaid
Globe Postpaid maintained its leadership on this segment of the market with the continued growth in
acquisitions throughout the year closing 2013 with over 2.0 million subscribers from 1.7 million last year.
The continued success of the fully customizable BEST-EVER MY SUPERPLAN bundled with the latest
™
®
devices from Apple , Samsung, and BlackBerry helped boost gross additions to reach 711,190 as of
full year 2013, 21% higher than 589,642 a year ago. Also, the Company‘s postpaid plans continued to
attract subscriptions from the industry‘s high-end prepaid subscribers who switch to postpaid, as well as
unique and new subscribers. Full year net incremental postpaid subscribers stood at 291,070, 4%
above 2012 level of 279,762.
TM
Globe continued to lead in the Postpaid segment with the Apple
launches during the last quarter of
2013 starting with the iPhone 5c and iPhone 5s and the eventual release of the new iPad Air and iPad
mini with Retina display. This year‘s iPhone launch (iPhone 5c and iPhone 5s) however, was scaled
down and used to promote aid and relief efforts in light of the recent calamity ―Haiyan‖ that affected
millions of Filipinos in the Visayas region. Subscribers who attended the event were encouraged to
bring in-kind donations as well as donate via Globe‘s GCash facility. The iPhone 5c and iPhone 5s were
made available under the Company‘s suite of first-ever fully customizable postpaid plans (Best-Ever
mySUPERPLAN) and the exclusive gadget upgrade program (iPhone Forever program). Under the
iPhone Forever program, new and existing Globe subscribers who are loyal iPhone users can swap their
current devices to get a new iPhone every year for free or with minimal one-time cash out. The iPhone
5c 16GB can be availed starting at iPhone Forever Plan 1599, while the iPhone 5s 16GB is available at
iPhone Forever Plan 1999, both for a contract of 24 months and are bundled with 1 gigabyte (GB) of
mobile LTE surfing and free calls and texts. Higher value postpaid plans are also available: iPhone
Forever Plan 2999, iPhone Forever Plan 5599 and iPhone Forever Plan 6999. The iPad Air and iPad
mini with Retina display, on the other hand, can now be availed with the following postpaid plans for 24
months contract period and complete with 85 hours of LTE surfing: iPad Air 16GB is available for as low
as P1,624 monthly at Plan 499 with P1,125 monthly cashout while the 32GB variant is available for as
low as P1,790 monthly at Plan 499 with P1,291 monthly cashout. Meanwhile, the iPad mini with Retina
display 16GB is offered at P1,499 monthly at Plan 499 with P1,000 monthly cashout while the 32GB
variant is available at P1,665 monthly at Plan 499 with P1,165 monthly cashout.
Globe Postpaid ARPU of P1,199 was 1% higher than last year‘s P1,191 as a result of a higher mix of
higher-MSF plans.
Globe Postpaid subscriber acquisition cost (SAC) declined year-on-year by 11% from last year‘s P8,432
to P7,473 as of end 2013, driven in part by the healthy mix of smartphones and gadgets with lower
subsidy levels. Globe Postpaid SAC remained recoverable within the 24-month contract period.
Prepaid
total mobile subscriber base. As of the end of 2013, cumulative prepaid subscribers stood at about 36.5
million, 16% better than last year‘s level of 31.4 million.
139
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.
a. Globe Prepaid
Globe Prepaid gross acquisitions substantially improved by 20% or 631,156 new SIMs in the fourth
quarter versus the third quarter, bringing the full year gross additions in 2013 to 13.2 million or 12%
higher than 2012 level of 11.8 million. This is mainly attributed to continued popularity of unlimited and
bucket offers bundled with the best chat apps that have gained traction this year, as well as the
successful Free Facebook campaign launched in November 2013. Full year 2013 net incremental
subscribers also improved by 43% to 1,396,299 from 977,710 in 2012 despite the elevated churn rates
as of end 2013 of 5.75% from 5.63% in 2012.
Globe Prepaid continued to offer the best and affordable services to its subscribers. In 2013, the selfservice menu (*143#) was further improved with the launch of “GO SAKTO” which allows the subscribers
to build their own promos (call, text and surf promos) the will fit their budget and lifestyle. Moreover, in
order to be more competitive in the market, Globe Prepaid introduced the following during the year:
GoUnli25 which offers the all-time favorite unlimited on-net voice and texts with FREE unlimited Viber
Chat; GoUnli30 which offers unlimited all-network SMS, unlimited on-net call and unlimited Facebook
with the best Chat Apps (FB Messenger, Viber, Kakao, WeChat!, Whatsapp, Line and GMessage) valid
for a day and the recent launch the “Choose Your Number SIM” with FREE unlimited calls to Globe/TM
and unlimited text to all networks plus Facebook.
Globe Prepaid ARPU declined by 6% year-on-year resulting from the revenue dilution from unlimited and
bucket service offerings. Globe Prepaid SAC were significantly higher than last year due to higher ads
and promo and commissions. Against last quarter, Globe Prepaid SAC declined by 61%. TM SAC,
however, was up 69% year-on-year and 30% quarter-on-quarter due to higher subsidy and increased
ads and promo.
b. TM
TM on the other hand, generated the highest gross acquisitions particularly during the fourth quarter,
achieving a record high of 4.8 million new SIMs or 20% better than previous quarter level of 4,005,807.
The free Facebook promo boosted the fourth quarter acquisition and TM‘s ramp-up in project executions
in order to stay in step with the competition‘s acquisition efforts. This brings the full year total gross
additions to nearly 17 million, up 38% from 12.3 million in 2012. Even with the slightly elevated churn
rates as of end December 2013, full year net incremental subscribers improved by 101% from about 1.8
million in 2012 to 3.7 million.
140
TM‟s sustained growth momentum was boosted by the different product launches throughout the year
that included value-for-money offerings such as AstigCombo10, AstigCombo15, Combo15, Combo20,
TM “Extend” as well as TM Astig Facebook. Mobile browsing offers was likewise expanded during the
year to include Viber with the launch of Viber products such as Viber20 for unlimited high-definition voice
calls and unlimited chat for P20, Viber10 for those who want unlimited Viber chat only and Viber30 for a
five (5) day variant of unlimited Viber chat. Also during the last quarter of 2013, TM launched
promotions in order to improve its international offers: TipIDD30 which offer four (4) minutes of
international calls to Saudi, UAE, Kuwait, Bahrain, Italy, UK, Australia and Japan for only P30 a day and
AstigItxt20 which gives its subscribers 30 international and all-network texts for only P20 valid for 1 day.
TM ARPU was down by 8% year-on-year with the continued shift from regular pay-as-you-use service to
unlimited and value offers. TM SAC, however, was up 69% year-on-year and 30% quarter-on-quarter
due to higher subsidy and increased ads and promo.
GCash
phone:











utility bills
insurance premiums
school tuition fees
online purchases
airline tickets
141
comes with an optional insurance coverage. With GCash PowerPay+,users enjoy mobile money
services like sending money, buying Globe or TM airtime load with a 10% rebate, and paying bills at the
speed of a text message without the need to cash-in to one‘s GCash account. It also allows 24/7
withdrawal from any of the 9,000 Automated Teller Machines (ATMs) nationwide, cashless shopping
through Megalink, BancNet and ExpressNet point of sale and financial assistance for accidental death
and burial assistance, life cover, residential fire, and ATM theft.
now has the largest remittance network in the country withmore than 9,000 active GCash outlets
nationwide.
Meanwhile, for electronic banking services, GCash secured a partnership with Philippine Savings Bank
eMoneyXchange service that will allow customers to link their UnionBank accounts to their GCash
To further complement its mobile wallet functions, Globe recently partnered with American Express® to
launch the GCash American Express® Virtual Card. The prepaid virtual card is linked to a subscriber‘s
GCash mobile wallet and allows users to shop conveniently online from both local and international
sites. Further, it gives the user a personalized US Address to allow delivery of purchases from
international online sites which may not be directly shipping goods to the Philippines.
142
On June 19, 2013, Globe achieved another milestone with its partnership with Home Development
Mutual Fund (HDMF) or the PAG-IBIG Fund to allow their over 12.6 million members to transact with
Pag-ibig via GCash, making it easy and more convenient for them to facilitate their Pag-Ibig
transactions. Pag-Ibig members can now easily pay their monthly mandatory savings and housing loans
anytime, anywhere using their GCash wallets linked to their Globe or TM phones, eliminating the need to
go to a Pag-Ibig office or an accredited payment center.
Also, GCash can now be used to purchase load even for other mobile networks via *143#. In addition,
CitiExpress and Unilink, as new GCash express partners, started offering GCash express cards to their
customers.
Moreover, GCash, is set to expand its network service in the country by growing its user base with the
recent partnership with TORCHe Global Marketing, Inc. (TGMI), a marketing consultancy firm focused
on helping companies reach out to the widest possible consumer base through the latest technologies in
mobile commerce and advertising. GCash services that will be made available for use of TGMI affiliates
include PowerPay+ Card, Buy Load service and Gcash outlets.
During the last quarter of 2013, several initiatives on GCash were launched in order to expand its
portfolio of services including real property tax payments via GCash available in Quezon City and
Valenzuela; buy through blink coupon codes for subscribers to experience unlimited Movie and TV show
streaming; or convert Gcash to rewards points. In addition, subscribers can now also apply for BanKO
loan via GCash with low interest rate, fast approval and hassle-free loan payments. Loan credit and
collection will be through their GCashPowerPay+ wallet.
BPI Globe BanKo
In 2011, BPI Globe BanKO, Inc. launched an innovative product that does not only generate healthy
helping create a solid base for their savings and investments. Called the BanKO Social Initiative (BSI)
In 2013, BPI-Globe Banko, the first mobile-based, microfinance-focused savings bank in the Philippines,
have joined hands with US Agency for International Development, in helping rural communities gain
access to formal financial services (i.e. cash in and cash out transactions, bills payment, airtime loading,
money remittance, and micro-insurance purchase) using their mobile phones. This partnership was
143
announced during the launch of the mobile money financial service for the llijan Multi-Purpose
Cooperative.
For the Year Ended
Service
1
Broadband ..………………………………………………………
2
Fixed line Data ……………………………………………………
3
Fixed line Voice ….………………………………………………
Fixed Line and Broadband Service Revenues…….................
1
b)
c)
d)
8,721
4,167
2,665
15,553
YoY
Change
(%)
20%
13%
-2%
14%
Monthly service fees of wired, fixed wireless, and fully mobile broadband data only and bundled
voice and data subscriptions;
Browsing revenues from all postpaid and prepaid wired, fixed mobile and fully mobile broadband
packages in excess of allocated free browsing minutes and expiration of unused value of
prepaid load credits;
a)
b)
c)
d)
3
10,440
4,691
2,605
17,736
31-Dec
2012
(Audited)
a)
2
31-Dec
2013
(Audited)
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, multicalling, 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.
144
Broadband
For the Year Ended
1
Wireless …………………………………………………………....
Wired………………………………………………………………….
Total (end of period)…………………………………………………
1
31-Dec
31-Dec
2013
2012
1,653,647
378,255
2,031,902
1,331,413
340,560
1,671,973
YoY
Change
(%)
24%
11%
22%
Globe Tattoo Broadband ended 2013 with P10.4 billion, up 20% compared to 2012 as a result of the
strong growth in its customer base, reaching over two million subscribers as of end-December 2013. The
outstanding revenue performance of the broadband business resulted from the continued aggressive
acquisitions campaigns, attractive pricing offers and product bundles.
Expansion in both revenues and subscribers was brought about by the Company‘s continued efforts to
provide differentiated and value priced broadband products. During the early part of 2013, Tattoo
introduced a lower price proposition for its 4G product suite (Tattoo 4G Flash for only P995; Tattoo
Prepaid Lifestyle sticks at P1,295). Meanwhile, Tattoo At-Home offered free unlimited calls to Globe/TM
in addition to landline and internet service in every Tattoo @ Home Broadband Bundle. Tattoo Prepaid
& Tattoo Postpaid launched several attractive promotions such as: 4G SuperStick priced down to
P1,995; LTE plans which start at P1,299 now comes with a FREE LTE dongle; Tattoo consumable plans
were further improved with more browsing hours for Plan 299 and for Plan 499. Also during this period,
Tattoo launched a revolutionary offer bannering the most affordable tablet bundles, wherein its
subscribers can get three devices FREE with unlimited internet browsing and mobile text and call
starting at Plan 1,298. Tattoo Prepaid tablet bundles was also made available during the last quarter
wherein subscribers can save as much as P2,845 with these new offers which carry affordable tablet
selection starting at P4,995 for a CloudPad 705W or a SkyWorth S73 and P6,995 for a SkyWorth S82.
All these bundles come with FREE Tattoo Mobile Wi-Fi that connects up to 10 devices with speeds of up
to 7.2 Mbps. Likewise, Tattoo LTE Mobile Wi-Fi with LTE speed up to 42 Mpbs (with power bank feature
which recharges your phone up to 2 times), was made available for only P4,995 with FREE 5GB of data
for 7days. Tattoo Postpaid on the other hand, now offers a FREE Mobile Wi-Fi with speed up to 12
Mbps with Tattoo unlimited Plan 999.
Fixed Line Data
Globe Group
For the Year Ended
31-Dec
31-Dec
2013
2012
YoY
Change
(%)
Fixed line Data
International …..……………………………………………………
Domestic …… ……………………………………………………..
1
Others ……………………………………………………………
928
2,232
1,530
899
1,958
1,310
3%
14%
17%
Total Fixed line Data Service Revenues………………………..
4,691
4,167
13%
1
Includes revenues from value-added services such as internet, data centers and bundled services.
The fixed line data segment continued its revenue growth with P4.7 billion, 13% higher year-on-year and
4% higher quarter-on-quarter. The increase was due to the Company‘s continued push to expand its
portfolio to remain responsive to the evolving needs and increasing demand for high-speed data nodes,
145
transmission links, and bandwidth capacity of its business and enterprise clients, including those in the
financial services, retail, offshoring and outsourcing industries.
Globe Business launched several initiatives in 2013 in order to further improve its portfolio featuring the
first large-scale, private and public-ready, next generation cloud in Asia - the PayrollCloud application,
an innovative Software-as-a-Service or SaaS providing on-time and accurate payroll accounting system;
Backup-as-a-Service platform which is the most advanced backup and restoration software, that enables
continuous data protection, local off-site storage and managed services to industries, enterprises as well
as small and medium businesses. Also the Globe HealthCloud, an end-to-end web-based solution seen
to revolutionize healthcare delivery in the Philippines was likewise introduced in the market.
Fixed Line Voice
Globe Group
For the Year Ended
31-Dec
31-Dec
2013
Cumulative Voice Subscribers 1
Net (End of period) ………….....................................................
Average Revenue Per Subscriber (ARPU)...............................
2
ARPU ……………………………………………………………
Average Monthly Churn Rate ..……………...............................
2012
YoY
Change
(%)
594,527
711,429
-16%
335
325
3%
4.85%
2.75%
1
Includes DUO and SuperDUO subscribers
2
Total fixed line voice revenues declined by 4% quarter-on-quarter bringing total revenues to close the
year at P2.6 billion or 2% lower from P2.7 billion the previous year. The decline was primarily caused by
lower international airtime rates.
Globe Group
For the Year Ended
ILD Revenues and Minutes
31-Dec
31-Dec
2013
2012
YoY
Change
(%)
Total ILD Revenues (P Million)* …………………………………...
11,957
12,653
-6%
Average Exchange rates for the period (P to USD1)……………
42.188
42.384
-
2,494
2,190
304
7.20
2,691
2,338
353
6.62
-7%
-6%
-14%
1
Total ILD Minutes (in million minutes) ………………………….
Inbound……………………………………………………………….
Outbound.…………………………………………………………….
ILD Inbound / Outbound Ratio (x) ………………………………...
*Prior period revenues have been restated for comparability
ILD minutes originating from or terminating to Globe and Innove networks.
1
Both Globe and Innove offer ILD voice services which cover international call services between the
Philippines to more than 200 destinations with over 700 roaming partners. This service generates
revenues from both inbound and outbound international call traffic, with pricing based on agreed
146
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 year on
year by 6% following the global trend, ILD voice revenues are declining due to competitive pressure from
over-the-top alternatives such as Facebook, Skype, and Google. However, to mitigate the anticipated
decline, Globe continues to offer international retail services (Duo International, Seafarer Sim, Local UK
and Italy sim) in countries with large OFW communities.
Meanwhile, Globe sustained its promotion on OFW SIM packs and the discounted call rate offers such
as IDD Sakto Calls (per-second IDD), TipIDD card, and IDD Tingi – the first bulk IDD service which can
be purchased via registration and through AMAX retailers nationwide. This is available in two
denominations: P20 for 5-minute calls to US, Canada, Hong Kong Singapore and Taiwan, and P30 for 3minute calls to Saudi Arabia, UAE and Kuwait. In addition, The Filipino Seafarer SIM enables Filipino
seafarers around the world to keep in touch with their loved ones back home at cheaper rates for as low
as US$0.20 per minute while sending SMS for only US$0.10 per sms. Subscribers who will avail of the
SIM will get two numbers in one SIM – an international mobile number and a Philippine Globe mobile
number. Globe and TM subscribers calling the Globe Seafarer SIM are only charged at local rates. The
Globe Local UK SIM card alternatively gives Filipinos one affordable rate of only 10 pence for each call
or text sent to Globe or TM number in the Philippines as well as calls and text to all UK networks.
Subscribers also pay only 10 pence for every MB of mobile internet. Moreover, Globe once again
expanded our international footprint with the launch of Globe local Italy SIM last November 24, 2013.
Filipino community in Italy can now enjoy calls to Globe in the Philippines for just five Euro cents per
minute, the lowest among all Italian mobile operators.
147
Total costs and expenses including depreciation for 2013 amounted to P
= 81,464 million, 14% higher than
2012‘s P
= 71,312 million. This is mainly due to the increased subscriber acquisition and re-contracting
costs following the sustained postpaid subscriber acquisition and retention efforts, higher trade
provisions and staff-related costs, services and other expenses on payments on real property tax and
licenses as well as catch up accruals booked in the fourth quarter. In addition to the elevated levels of
operating expenses, the accelerated depreciation related to the ongoing network modernization and IT
transformation programs, led to the increase in total depreciation expenses by 17% compared to the
prior year‘s P
= 23,584 million.
Costs and Expenses (P Million)
Globe Group
For the Year Ended
31-Dec
31-Dec
YoY
2013
2012
Change
(Audited)
(Audited)
(%)
Cost of sales…………………………………………………………….
Less: Non-service revenues…………………………………………..
Subsidy………………………………….............................................
9,953
4,641
5,312
7,679
3,704
3,975
30%
25%
34%
Interconnect…………………………………………............................
Selling, Advertising and Promotions…………………………………
Re-contracting………………………………………............................
Staff Costs ……………………………………………………………...
Utilities, Supplies & Other Administrative Expenses........................
Rent………………………………………………….............................
Repairs and Maintenance…………………………………………….
Provisions
…………………………………………………………………..
Services and Others………………………………….........................
Operating Expenses…………………………………………………
9,280
4,483
2,532
7,473
4,399
3,535
3,657
8,859
4,698
1,743
6,426
4,260
3,153
3,672
5%
-5%
45%
16%
3%
12%
-
2,457
10,858
48,674
1,604
9,338
43,753
53%
16%
11%
Depreciation and Amortization……………….……………………
Affected by network modernization………………………………
Others………………………………………………………………..
27,478
9,066
18,412
23,584
5,080
18,504
17%
78%
-
81,464
71,312
14%
Costs and Expenses………………………………………………...
Interconnect
Interconnect costs grew by 5% from P8,859 million in 2012 to P9,280 this year mainly on Mobile
Telephony and Nomadic and was partially reduced by lower Wireline voice.
Subsidy
Subsidy, which comprise 10% of total subsidy and operating expenses, rose to P5,312 million in 2013,
34% higher than the P3,975 million booked in the previous year. Increase in subsidy was driven by
higher gross additions in Mobile Postpaid (+21%) and Nomadic (+23%).
Marketing
Marketing, which comprise 8% of total subsidy and operating expenses, declined by 5% from P4,698
million in 2012 to only P4,483 million with lower ads and promo spending for rewards/loyalty, billboards,
production costs and etc.
148
Re-contracting
Full year 2013 re-contracting costs grew by 45% to P
= 2,532 million from P
= 1,743 million last year. The
increase in re-contracting costs is mainly due to the growth in re-contracting subs following the launch of
the latest phones and gadgets from Apple™, Samsung and BlackBerry during the year, coupled by the
shift of the mix towards the mid to high-end plans as the subscriber renews their contract for another 24
months in order to get a better smartphone, resulting in a higher phone subsidy
Staff Costs
Staff costs increased by 16% from P6,426 million in 2012 to P7,473 million caused by a larger
headcount and its associated employee-related benefits and incentives. Total headcount was at 5,927 in
2013, up from 5,816 in 2012.
Utilities, supplies and other administrative expenses, including travel and transportation, was up by 3%
versus last year level of P4,260 million mainly on higher utilities expense coming from increased
electricity and water consumption and partly offset by lower supplies from subscriber installation
materials due to reversal of excess accrual in 2012, as well as lower tools.
Rent
Rent expenses which account for 7% of operating expenses and subsidy increased to P3,535 million or
12% year-on-year growth from P
= 3,153 million last year following Globe‘s continued expansion of its 2G,
3G, and 4G networks.
Provisions
Provisions for the year, which include trade, traffic and non-trade provisions, significantly grew by 53%
from 2012 level of P
= 1,604 million mainly for trade due to additional provision for Yolanda accounts,
coupled with provisions for Philcox account for data services, higher provision for market decline,
obsolescence as well as increased provisions for traffic as partly cushioned by lower provision for
probable losses on advances to contractors and vendors.
Repairs and maintenance, which accounted for 7% of total operating expenses and subsidy, stood at
P
= 3,657 million, slightly lower against last year‘s level of P
= 3,672 million. This is mainly due to the reversal
of 2012 excess accruals largely on TSA, lower blackberry fees due to this year‘s clean-up of accounts in
the RIM webtool coupled by savings on blackberry payout fee with the release of blackberry OS10,
building improvements, and national transmission, as partially offset by higher outside plant out-of–
scope charges (due to typhoon and earthquake), IT and supplies facilities equipment and international
cable systems.
Services and Others
Services and other expenses increased by 16% to P
= 10,858 million against last year, coming mostly from
higher cost per hour of contracted services and customer contact services due to the high volume of
postpaid calls, higher professional fees on various consultant‘s management fees, higher commission
fees following stabilization efforts for Phase 1 IT modernization, higher payments for taxes and licenses
fees as well as higher credit card charges following increase in availment of 0% interest promo on
mobile handsets coupled by this year‘s stretch period from 12 months in 2012 to 24 months in 2013 as
partially reduced by lower royalty.
149
Depreciation and amortization expenses rose to P
= 27,478 million as of end-December 2013 or about
17% year-on-year growth driven mainly by the continued network and IT transformation projects.
Excluding the accelerated depreciation related to the modernization programs, depreciation would have
remained flat year-on-year.
OTHER INCOME STATEMENT ITEMS
income, and net property and equipment-related income (charges) as shown below:
Globe Group
For the Year Ended
Non-operating Income / Expense (P Million)
1
Interest Expense ………………………...................................
Gain / (Loss) on derivative instruments – net
Swap costs and other financing costs……...............................
Foreign Exchange (loss).…..……………………………………
31-Dec
2013
(Audited)
(2,092)
(89)
(245)
(486)
(2,912)
31-Dec
2012
(Audited)
Foreign Exchange gain ……………………...............................
Interest Income ……………………………..................................
Others – net…………………………………..................................
0
688
52
(2,105)
(75)
(183)
(2,363)
318
580
(213)
Total Other (Expenses) Income……………...............................
(2,172)
(1,678)
YoY
Change
(%)
1%
19%
34%
23%
19%
-124%
29%
1
2012 interest expense have been restated to reflect the adoption of amendments to PAS 19
Globe group‘s non-operating charges posted a 29% or P494 million year-on-year increase to close the
period at P2.2 billion. This was mainly due to higher foreign exchange loss and swap costs, as partially
tempered by higher interest income as of end December 2013.
The Company recorded foreign loss of P
= 486 million as of end-December 2013 in contrast to the P
= 318
million foreign exchange gains booked in the same period last year. (See related discussion on
derivative instruments and swap costs in the Foreign Exchange and Interest Rate Exposure section).
150
Globe Group
1
Total Assets …………………………………………………….
2
Total Debt ……………………………………………………….
1
Total Equity ……………………………………….
Total Debt to EBITDA …………………………………………….
Debt Service Coverage……………………………………………
Interest Cover (Gross) ……………………………………………
Debt to Equity (Gross) ……………………………………………
3
Debt to Equity (Net) ……………………………………………..
Total Debt to Total Capitalization (Book) ……………………….
Total Debt to Total Capitalization (Market) ...…………………..
31-Dec
31-Dec
2013
2012
159,079
69,301
41,639
148,012
61,779
45,698
1.90
2.83
12.54
1.66
1.49
0.62
1.78
2.02
12.02
1.35
1.20
0.57
0.24
0.30
1
2012 total assets/ total equity have been restated to reflect the adoption of amendments to PAS 19.
2
3
Net debt is calculated by subtracting cash, cash equivalents, and short term investments from total debt.
YoY
Change
(%)
7%
12%
-9%
bank covenants albeit higher year-on-year with the additional debt as a result of Globe‘s transformation
and modernization program.
Globe Group‘s consolidated assets as of 31 December 2013 amounted to P159,079 million compared to
P148,012 million as of end 2012. Consolidated cash, cash equivalents and short term investments
(including investments in assets available for sale and held to maturity investments) was at P7,421
million at the end of the period compared to P6,760 million as of end 2012.
Gearing ratios increased year-on-year but are still within the covenant limits given the additional debt
during the period to fund the transformation initiatives and the impact of accelerated depreciation on net
income and retained earnings. Globe ended the year with gross debt to equity ratio on a consolidated
basis at 1.66:1 and is well within the 2:1 debt to equity limit dictated by Globe‘s debt covenants.
Meanwhile net debt to equity ratio was at 1.49:1 as of end 2013 and 1.20:1 as of end December 2012.




1
2
As of 31 December 2013, Globe is well within the ratios prescribed under its loan agreements.
1
2
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 2013.
151
Globe Group
31-Dec
2013
(Audited)
33,233
31-Dec
2012
(Audited)
24,220
Net Cash from Investing Activities …………………………….
(27,368)
(24,616)
11%
Net Cash from Financing Activities………………….…………
(5,476)
2,198
-349%
(P Million)
1
Net Cash from Operating Activities ……………………………
1
1
YoY
change
(%)
37%
2012 net cash from operating and investing activities have been restated to reflect the adoption of amendments to PAS 19.
Net cash flows provided by operating activities as of end-December 2013 year stood at P33,233 million,
up 37% year on year. This year‘s cash inflows from operating activities were mainly used to fund capital
expenditures on the network transformation projects and other initiatives of Globe during the period.
Meanwhile, net cash used in investing activities amounting to P27,368 million was up 11% driven by
investments in property and equipment as a result of continuing upgrade and migration to a modernized
network, and ongoing efforts to expand the coverage and capacities of the broadband network and
improve the quality of its mobile service. Consolidated cash capital expenditures as of end December
2013 amounted to P
= 28,999 million, up 44% from last year‘s P
= 20,124 million.
Globe Group
(P Million)
1
Capital Expenditures (Cash) ……………………………………..
Increase (decrease) in Liabilities related to Acquisition of PPE &
capitalized asset retirement obligation and borrowing cost….…
2
Total Capital Expenditures ………………………………………
2
Total Capital Expenditures / Service Revenues (%)……………
1
31-Dec
31-Dec
2013
2012
28,999
20,124
6,686
6,781
35,780
26,810
40%
32%
YoY
change
(%)
44%
1%
33%
Cash capital expenditures – property and equipment acquired as of report date
2
Consolidated net cash from financing activities significantly decreased by 349% year on year, driven by
higher repayments of borrowings, dividends and interest payments. Consolidated total debt, on the
other hand, increased by 12% from P
= 61,779 million in year-end 2012 to P
= 69,301 million this period.
33% of US$ consolidated loans have been effectively converted to P via USD125 million in currency
hedges. After swaps, effectively 16% of total debt are denominated in USD as of end-December 2013.
152
debt as of 31 December 2013:
Year Due
2014 ……………………………………………………………………………………………………………
2015…………………………………………………………………………………………………………….
2016…………………………………………………………………………………………………………….
2017 ……………………………………………………………………………………………………………
2018 through 2023……………………………………………………………………………………………
Total…………………………………………………………………………………………………………….
Principal
*
(US$ Mn)
252
138
166
107
907
1,570
On March 6, 2013, Globe signed a US$ 75 million 3-year term loan with floating interest rate with Bank
of Tokyo – Mitsubishi UFJ, Ltd., Singapore Branch as lender. The purpose of the loan is to fund Globe
Telecom's capital expenditures.
On March 22, 2013, Globe signed a US$120 million 7-year term loan with floating interest rate with
Metrobank as lender to finance Globe Telecom's capital expenditures.
On July 29, 2013, Globe signed a US$40 million 3-year term loan with floating interest rate with Mizuho
Bank Ltd. as lender to prepay and refinance certain debts.
On May 7, 2013, the BOD approved the Globe Group‘s plan to issue a P7,000 million retail bond to
partly finance the capital expenditure requirements for 2013. As registered securities, the bonds will be
offered to both institutional and retail investors. The amount comprises P4,000.00 million and P3,000
million bonds due in 2020 and 2023, with interest rate of 4.8875% and 5.2792%, respectively. The retail
bonds were issued on July 17, 2013.
On December 4, 2013, Globe signed a P7.0 billion 7-year term loan with fixed interest rate with Land
Bank as lender. The proceeds of the loan shall be used to partially finance Globe Telecom's general
financing and corporate requirements for capital expenditures.
Equity as of December 31, 2013 was down 9% from P45,698 million to P41,639 million. Globe‘s capital
stock consists of the following:
Preferred Shares
th
preferred share;
th
153
i.
No preemptive right to any share issue of Globe Telecom, and subject to yield protection in case
The dividends for preferred shares are declared upon the sole discretion of the Globe Telecom‘s BOD.
To date, none of the preferred shares have been converted to common shares.
Common Shares
Common shares at par value of P50 per share of which 132 million are issued and outstanding out of a
Cash Dividends
On 5 February 2013, the Board of Directors approved the declaration of the first semi-annual cash
dividend of P33.50 per common share, payable to shareholders on record as of 19 February 2013. Total
dividends of about P4.4 billion were paid on 12 March 2013.
On 6 August 2013, the Board of Directors approved the declaration of the second semi-annual cash
dividend of P33.50 per common share, payable to shareholders on record as of 22 August 2013. Total
dividends of about P4.4 billion were paid on 13 September 2013. The Board of Directors has likewise
approved the proposed change in the frequency of the cash dividend distribution from semi-annual to
quarterly beginning first quarter of 2014. The quarterly cash dividends will continue to be based on the
policy of 75%-90% of prior year‘s core net income. The amended frequency in the payouts will provide
the Company with the better cash planning and liquidity management and at the same time ensure a
more consistent dividend distribution to the shareholders.
On 8 November 2013, Globe‘s Board of Directors approved the declaration and payment of cash
dividends for the Company‘s preferred shares. The payment of cash dividends to all shareholders of
Globe‘s outstanding preferred shares was based on the average 30-day PDST-F (formerly MART1) as
computed by PDEx plus 2%, payable to shareholders on record as of 22 November 2013 and were paid
on 8 December 2013.
On 10 December 2013, The Company announced that the quarterly cash dividend distribution will be
implemented beginning in the third quarter of 2014 instead of the first quarter of 2014.
Consolidated Return on Average Equity (ROE) registered at 11% as of end-December 2013, compared
to 14% in the same period in 2012 using net income and based on average equity balances for the year
ended. Using annualized core net income excluding the effects of accelerated depreciation on net
income, return on average equity for the year just ended was at 27% compared to 22% of 2012.
154
Accordingly, consolidated basic earnings per common share were P37.25 and P51.45, while
consolidated diluted earnings per common share were P37.22 and P51.38 for the years ended 31
December 2013 and 2012, respectively.
Financial Risk Management
5
revenues were at 17% and 19% of total service revenues for the periods ended 31 December 2013 and
2012, respectively. In contrast, Globe‘s foreign-currency linked expenses were at 10% and 8% of total
operating expenses for the same periods ended, respectively.
2013
P15.29 billion
P3.21 billion
P0.24 billion
Due to these net US$ inflows, an appreciation of the Peso have a negative impact on Globe‘s Peso
EBITDA. Globe occasionally enters into forward contracts to hedge against a peso appreciation. All
forwards have matured by year-end 2013.
Realized loss from forward contracts that matured in 2013 amounted to P144.70 million.
follows:
US$ Assets
US$ Liabilities
December 2013
US$191 million
US$549 million
US$358 million
the end of each reporting period. Given the net US$ liability position, a depreciation of the peso results
in a revaluation or forex loss in our P&L. As of December 2013, the Philippine Peso stood at P44.398 to
the US dollar, a weakening versus the 2012 year-end rate of P41.078. Due to the weakening peso, the
Globe Group charged a total of P486 million in net foreign exchange losses to current operations for the
year of 2013.
In April 2013, Globe entered into cross currency swaps amounting to US$125 million to hedge the FX
and interest rate risk on some of its new US$ loans. The MTM of the swap contracts stood at a gain of
P491 million as of end-December 2013.
5
155
As of end-December 2013, Globe has a total of US$26 million in US$ interest swaps, P4.31 billion in P
interest rate swaps and US$125 million in cross currency swaps that were entered into contracts to
achieve these targets. The USD and P swaps fixed some of the Company‘s outstanding floating rate
debts with quarterly or semi-annual payment intervals up to April 2020.
As of end-December 2013, 63% of peso debt is fixed, while 46% of US$ debt is fixed after swaps.
The MTM of the interest rate swap contracts (not including the currency swap contracts) stood at a loss
of P151 million as of end-December 2013.
the company have any structured notes which require use of judgment for valuation purposes. (Please
refer to the attached Notes to the Financial Statements for additional information on active and inactive
markets).
derivative instruments. As of 31 December 2013, the MTM value of the derivatives of the Globe Group
amounted to a gain of P336 million while loss on derivative instruments arising from changes in MTM
reflected in the consolidated income statements amounted to P233 million. (Please refer to 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 of the Financial Statements for the sensitivity 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 US$/P rate as it specifically pertains to
the revaluation of the net unhedged liability position of the company, and foreign exchange derivatives.
156
2012 FINANCIAL AND OPERATIONAL RESULTS
Globe Group
For the Year Ended
31-Dec
31-Dec
YoY
2012
2011
Change
(%)
1
Mobile ………………………………………………………….....
Broadband……………………………………………………...….
Fixed line Data………………………………………………...…..
1
Fixed line Voice ……………………………………………….…
2
Costs and Expenses …………………………..…………………...
Cost of Sales…………………………………………………………
2
Operating Expenses ………………………………………………..
2
EBITDA …………………………………………………………………
2
EBITDA Margin ……………………………….….…………………..
Depreciation……………………………………………………………
Others…………………………………………………………………
2
EBIT …………………………………..……….……………………….
2
EBIT Margin …………………………..……….………………………
Non-Operating Charges……………………………………………..
2
Net Income After Tax (NIAT) …….….….…………………………..
3
Core Net Income ……………….…………………………………….
86,446
82,742
67,189
8,721
4,167
2,665
3,704
51,435
7,679
43,756
35,011
42%
23,584
5,080
18,504
11,427
14%
(1,659)
6,857
10,275
81,518
77,765
63,538
7,496
3,792
2,939
3,753
46,414
5,888
40,526
35,104
45%
18,941
18,941
16,163
21%
(2,066)
9,832
10,030
6%
6%
6%
16%
10%
-9%
-1%
11%
30%
8%
25%
-2%
-29%
-20%
-30%
2%
1
2011 service revenues have been restated to reflect the change in the presentation of outbound revenues to be at gross of
interconnect expenses (from net previously).
2
The selected financial data as of and for the years ended December 31, 2012 and 2011 discussed herein were derived from the
December 31, 2012 audited consolidated financial statements of the Globe Group which have not been restated to include the
effects of the adoption of PAS 19.
3
Core net income is net income after tax (NIAT) but excluding foreign exchange and mark-to-market gains (losses), and nonrecurring items.

Full year 2012 consolidated service revenues soared to a historic-high of P82.7 billion, up 6% from
2011 results of P77.8 billion. The mobile business sustained its strong growth momentum by
delivering a 6% year-on-year increase in revenues on account of the record gross acquisitions in the
postpaid segment, expansion in mobile browsing usage as well as unlimited and bulk voice services.
Incremental revenues compensated for the decline in IDD revenues which were partly weighed
down by an appreciating Peso, and also helped to counter market challenges underscored by
peaking penetration levels resulting from increasing incidence of multi-SIM, declining yields from
unlimited and value promotions, and intensifying competition. Fixed line and broadband revenues
likewise contributed additional revenues and registered 9% year-on-year growth with sustained
expansion in total broadband subscriber base and steady demand for data services from the
corporate sector.
157

Operating expenses and subsidy increased by 12% year-on-year from P42.7 billion to P47.7 billion
driven largely by marketing and subsidy costs which increased substantially following the aggressive
acquisition of new postpaid subscribers who opted to get the higher-end gadgets such as the
Apple™ iPhone. Marketing costs also increased to support the various brand-building initiatives
such as product and service launches for the mobile and broadband business. As a result,
marketing and subsidy as a percentage of service revenues rose to 13% in 2012 from 9% in 2011.
Network-related costs, which included lease, utilities, and repairs and maintenance were also higher
in 2012 as a result of the continued expansion of the 2G, 3G, and broadband networks. Operating
expenses in 2012 likewise included charges for various outsourced and contracted services, as well
as professional fees resulting from the various projects being undertaken by the Company, including
our network and IT modernization initiatives. Interconnect costs, on the other hand, were down
year-on-year driven by the NTC-mandated reduction in access charges implemented in late 2011.

Consolidated EBITDA of P35.0 billion was lower by about P93 million from previous year‘s total of
P35.1 billion as the overall growth in expenses outpaced the increase in revenues. As a result,
EBITDA margin declined from 45% in 2011 to 42% in 2012.

Total depreciation expense grew 25% year-on-year from P18.9 billion to P23.6 billion with the
increase attributed mainly to charges related to the network modernization and IT transformation
programs. As the Company had disclosed in the past, the carrying value of the old, non-useable
assets will impact Globe‘s profitability through an acceleration of depreciation over its remaining
useful life and until such time when the new, replacement assets are ready for service. Accelerated
depreciation charges increased further in the fourth quarter to bring the full year total to P5.1 billion.
Excluding this item, total depreciation expense would have declined by 2% against previous year to
about P18.5 billion.

Consolidated net income after tax was down 30% year-on-year from P9.8 billion to P6.9 billion as
revenue gains were offset by the impact of accelerated depreciation charges related to the
Company‘s network modernization and IT transformation programs as well as sustained investments
in subscriber postpaid acquisitions. Excluding foreign exchange and mark-to-market gains and
losses as well as non-recurring items, core net income was up 2% from P10.0 billion in 2011 to
P10.3 billion in 2012.

Full year 2012 capital expenditures amounted to P26.8 billion, 54% higher than previous year‘s
spending of P17.4 billion. As a result, total capital expenditures as a percentage of service revenues
were up at 32% compared to 22% in 2011. Capital expenditures for the year included amounts to
expand and upgrade the Company‘s broadband and mobile networks and to deploy 4G mobile
technology via HSPA+ in key areas nationwide. At the end of the year, Globe has a total of 13,241
base stations and 7,097 cell sites to support its 2G, 3G, 4G and WiMAX services.

For 2013, Globe has earmarked about US$550 – 650 million in capital expenditures. This consists
of US$160 – 210 million for transformation initiatives and about US$290 million for business as usual
spend for provisions for fixed line data investments, international cable facilities, and IT
infrastructure. Other capital expenditures for 2013 also include carryover spend of about US$100
million from 2012.

Regular cash dividends paid out in 2012 amounted to P8.6 billion, representing 86% of 2011 core
net income. This was in line with the Company‘s dividend policy of distributing 75% to 90% of prior
year‘s core net income. Total dividend payout of P65 per common share translates to a dividend
yield of 6% based on beginning of 2012 share price. In November 2011, the Company amended its
dividend policy to be at 75% to 90% of prior year‘s core net income instead of reported net income.
This was to ensure that dividends would remain sustainable and yields competitive, despite the
expected decline in near-term profits arising from the accelerated depreciation charges related to the
transformation efforts.
158

For 2013, the Company expects the market to be more challenging given peaking penetration rates
as a result of the increasing incidence of multi-SIM, continuing revenue dilution with the impact of
unlimited and value service offerings, and intensifying competition with PLDT leveraging on its larger
subscriber base. Against this environment, the Company sees consolidated revenues growing by
mid-single digit from the 2012 level. Near-term earnings, meanwhile, will continue to be impacted by
(1) project management and other transition costs related to the transformation initiatives with the
2013 estimated transition costs amounting to US$17 Million, (2) continued investments in marketing
and handset subsidy to respond to competition and fuel the growth of the Company‘s postpaid
business, (3) total depreciation charges of about P25 to P26 Billion, inclusive of P8 to P9 Billion in
accelerated depreciation expenses related to the network modernization, and (4) additional interest
expenses from additional debt related to modernization initiatives. However, in spite of the lower
near-term earnings, the Company expects its balance sheet and financial position to remain strong,
with dividend pay-outs sustained at competitive levels. Overall, Globe sees the coming year as a
transition year with the network modernization expected to be completed by end-2013, and a period
of sustained investments in customers and in networks, systems and processes.
GROUP OPERATING REVENUES BY SEGMENT
For the Year Ended
Operating Revenues By Businesses (P Million)
31-Dec
31-Dec
2012
2011
YoY
Mobile
69,963
67,189
2,774
66,566
63,538
3,028
Change
(%)
5%
6%
-8%
Total Operating Revenues…………………………………………...
16,483
15,553
930
86,446
14,952
14,227
725
81,518
10%
9%
28%
6%
* 2011 service revenues have been restated to reflect the change in the presentation of outbound revenues to be at gross of
The Globe Group closed the year with total net operating revenues of P86.4 billion, 6% above prior
year‘s P81.5 billion.
The mobile business continued to post robust top line performance which further solidified the gains
achieved in prior periods. Full year 2012 revenue growth was organic which resulted from the
Company‘s initiatives that included revitalizing retail channels anew with the launch of the deployable
Pop-Up stores; increasing presence in international markets by boosting services that included unlimited
data roaming, discounted IDD calls, and Globe DUO international, that cater to traveling and overseasbased Filipinos; and expanding the reach of the mobile commerce arm, GCash, through various
partnerships and service launches such as the GCash mobile application, Amex Virtual Card, and
PowerPay+. The Company likewise continued to offer the latest and much-anticipated gadgets such as
™
the Apple iPhone 5 and Samsung Galaxy S III, while at the same time it continued to innovate and
provide the best value-for-money service offerings to all its subscribers. But most importantly, 2012 was
marked by the Company‘s ambitious network modernization aimed at further improving the quality of its
voice, SMS, and data services and to eventually prepare the Company for the anticipated surge in
mobile data traffic. From these initiatives, Globe delivered revenues of P67.2 billion, up 6% against
2011 despite a maturing industry marked by increasing incidence of multi-SIM usage and peaking
penetration levels, and eroding prices and margins resulting from lower-yield value offerings.
159
The broadband and fixed line data segments likewise posted significant gains on account of the rising
demand for data and internet connectivity. Full year broadband revenues were up 16% to P8.7 billion as
the year marked another milestone for the business with the commercial launch of its broadband LTE
service that provided subscribers with alternative tools to improve their overall internet experience. The
broadband business likewise continued to ride on the popularity of social networking sites and benefited
from declining prices of access devices such as PCs, tablets, and laptops. Total broadband subscribers
stood at about 1.7 million by the end of 2012.
Mobile non-service revenues, on the other hand, were down by 8% from previous year‘s level of P3.0
billion to about P2.8 billion in 2012 as a result of high subsidies for the postpaid plans. Fixed line and
broadband non-service revenues, on the other hand, were up by 28% year-on-year due to sustained
strong sales of Tattoo On-The-Go dongles.
MOBILE BUSINESS
For the Year Ended
Mobile Service Revenues (P Million)
Service
1
Data ..………………………………………………………………
2
Voice ….…………………………………………………………...
Mobile Service Revenues *………………………………………..
31-Dec
31-Dec
YoY
2012
2011
Change
(%)
32,819
34,370
67,189
31,084
32,454
63,538
6%
6%
6%
* 2011 service revenues have been restated to reflect the change in the presentation of outbound revenues to be at gross of
1
Mobile data 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 payouts to content providers.
2
a)
b)
c)
d)
e)
loaded;
including currency exchange rate adjustments (CERA) net of loyalty discounts credited to subscriber billings; and
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 (e) are reduced by any payouts to content providers.
Mobile Data
Mobile data revenues, which comprised 49% of total mobile service revenues, increased by 6% from
about P31.1 billion in 2011 to P32.8 billion in 2012. Year-on-year growth was led by mobile data
browsing, unlimited SMS subscription and other value-added services. Mobile browsing generated
revenues of over P3.1 billion in 2012 compared to P2.0 billion in 2011 resulting from increased
smartphone penetration and the Company‘s continued launch of affordable mobile data plans which now
include unlimited surfing for TM subscribers.
160
On the other hand, inbound SMS revenues declined year-on-year and was driven by the NTC-mandated
reduction in access charges from P0.35 to P0.15 per SMS, implemented in the last quarter of 2011.
Local inbound SMS traffic, or SMS originating from other networks but terminating in Globe‘s network,
grew against last year, partially mitigating the impact of the reduced access charges. Note further that
the reduction in inbound SMS revenues was offset by a greater reduction in interconnect charges (for
SMS originating in Globe‘s network but terminating in other networks).
The Company provides superior text and data services to serve the needs of its loyal Globe and TM
subscribers. Postpaid and prepaid customers get the most value for money with the array of unlimited
and bucket offers for both SMS and mobile browsing services.
Globe offers all-day unlimited on-net SMS for its postpaid and prepaid subscribers with UnliTxt20, while
TM provides AstigTxt10 for the same service. Alternatively, for a 30-day subscription to unlimited on-net
text service, Globe Postpaid and Globe Prepaid subscribers may avail of SuperTxt. TM subscribers, on
the other hand, get unlimited on-net SMS for 2 days, 3 days, or 5 days by subscribing to other variants of
the AstigTxt offering.
The Company also offers a variant of its unlimited text service that comes with 50 minutes worth of voice
calls within the Globe and TM networks with Globe Prepaid‘s SuperCombo20. On the other hand, valueseeking Globe and TM subscribers who wish to cap their daily SMS usage may subscribe to SuliTxt to
get 100 and 25 on-net texts per day, respectively.
The Company at the same time provides all-network text services led by My SuperTxt All, an unlimited
text service for 30 days available for its Globe Postpaid subscribers. TM subscribers, on the other hand,
get unlimited SMS to all networks for 1 day with UnliTxtAll20. For its all-network bucket text services,
TM provides 150 SMS with its AstigTxtAll service, while Globe Prepaid offers 25 on-net SMS and
additional 5 texts to other networks with its Immortal Txt offering. In addition, the SMS allocation from
Immortal Txt does not expire for as long as the subscriber maintains a P5 load balance.
Globe and TM also offer attractive and affordable mobile browsing services ranging from consumable
time-based or volume-based data plans to unlimited mobile surfing. For unlimited chatting, downloading,
e-mailing and surfing, Globe Postpaid and Globe Prepaid subscribers may subscribe to SuperSurf. For
postpaid and prepaid subscribers who use BlackBerry® devices, Globe offers all-in unlimited
BlackBerry® services with SuperSurf for BlackBerry® Max. Alternatively, for those who prefer to use
selected services such as unlimited push email applications, Globe Postpaid and Globe Prepaid
subscribers may simply avail of BlackBerry® Messaging, while if they only want to get unlimited access
to social networking applications, they simply have to register to BlackBerry® Social. For unlimited use
register to BlackBerry® Chat. Alternatively, Globe Postpaid subscribers may avail of consumable addon data plans with Postpaid PowerSurf which provides 50MB of data usage for as low as P99 for 30
days, while Globe Prepaid and TM subscribers can sign up for consumable time-based mobile browsing
services for as low as P15 for 1 hour of use. For unlimited access to Facebook, meanwhile, the
Company offers Super Facebook and TM Astig Facebook for only P10 a day for its Globe Prepaid and
TM subscribers.
Mobile Voice
Mobile voice revenues, which accounted for 51% of total mobile service revenues, increased by 6% from
P32.5 billion in 2011 to P34.4 billion in 2012. Revenues grew largely on higher unlimited and bulk voice
subscriptions as well as VOIP and roaming services than in 2011. This year-on-year increase
compensated as well for the year-on-year decline in regular and IDD voice services.
Globe remains the only operator in the country that offers per second voice charging with Globe‘s Super
second. The Company also provides affordable on-net bucket voice services such as Tawag 236 for 20161
minute consumable calls for only P20 for Globe Postpaid and Globe Prepaid subscribers, alongside
TM‘s Todo Tawag 15/15 service offering for 15-minute on-net call for only P15. To take a shorter 3minute call within the TM and Globe networks, on the other hand, TM subscribers may simply register to
TM SuliTawag 5 for only P5, or subscribe to TM Dagdag Call to get additional 3 minutes of calls for just
P5 as long as a subscriber is registered to any of TM‘s text promotions.
Likewise, the Company offers an all-network voice service with TM‘s AstigTawag20 which provides 15
consumable minutes of calls for only P20. Globe, on the other hand, continues to offer the marketchanging 2-in-1 mobile and landline service SuperDuo for its postpaid and prepaid subscribers.
For its international services meanwhile, Globe continues to offer its pioneering per-second charging,
IDD Sakto Calls, and its P5 per minute overseas call, Super Sulit Tipid IDD, to select Bridge Mobile
Alliance operators. Globe is at the same time offering a bucket IDD service to popular and selected
overseas destinations with IDD Tingi, while continuing to offer its TipIDD card at various Globe
distribution channels. The Company‘s international voice services also include Super IDD, an unlimited
call service for 24 hours to select destinations worldwide, and Globe Duo International, which provides
registered Globe Postpaid and Globe Prepaid subscribers with virtual US landline numbers which they
can use to communicate with their loved ones in the USA. Families and friends in the USA in turn may
call their loved ones back in the Philippines and be charged at domestic US rates only.
browsing services through its extensive array of combo packages. Globe Postpaid subscribers, for
instance, may take unlimited calls and send unlimited texts to a frequently called Globe or TM number
for just P175 for 30 days with its SuperOne service offering. Alternatively, postpaid subscribers may
avail of SuperUnli to make unlimited calls and SMS to any Globe or TM subscribers.
For Globe Prepaid, subscribers are allowed to make unlimited on-net calls, send unlimited on-net SMS
and browse all they want by subscribing to All Unli Trio for as low as P60 a day. Globe Prepaid also
offers unlimited all-network SMS plus 1 hour of mobile browsing with SuperUnliAllTxt 25. Subscription to
SuperAll Txt 20, on the other hand, allows subscribers to send 250 texts to all networks and make 10
minutes of on-net calls for only P20 a day. Globe Prepaid also offers All Net Combo for unlimited allnetwork SMS and 10 minutes of all-network calls, 50 minutes of on-net calls, and additional 5 MB of
consumable mobile browsing for as low as P25 a day. The Company likewise offers Immortal Trio to
Globe Prepaid subscribers to allow 50 on-net SMS, 5 all-network texts and 5 minutes of on-net calls for
only P25 per subscription. Similar to the other Immortal services, the SMS and voice allocations from
the promos do not expire for as long as the subscriber maintains a P5 load balance. Globe Prepaid
subscribers also have the option to subscribe to Unli Tingi to get unlimited all-network texts, unlimited
on-net calls, and unlimited mobile browsing valid for 1 hour for only P5. SuperUnli, which allows
unlimited calls and SMS within the Globe and TM networks, is also available for one day subscription for
Globe Prepaid subscribers for only P25.
TM, on the other hand, offers unlimited on-net calls from 10 PM to 5 PM the following day and unlimited
on-net SMS for 24 hours with UnliCombo for as low as P20 for 1 day. TM subscribers similarly get
bucket text service to all networks, unlimited on-net SMS and bulk on-net voice calls with AstigCombo.
162
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)………..
1
Globe Postpaid ……………………………………………………….
33,119,035
1,734,468
30,040,400
1,454,706
YoY
Change
(%)
10%
19%
Prepaid .………………………………………………………………...
Globe Prepaid ………………………………………………………
TM ……………………………………………………………………
31,384,567
16,440,142
14,944,425
28,585,694
15,462,432
13,123,262
10%
6%
14%
Net Subscriber (or SIM) Additions………………………………...
Globe Postpaid . ……………………………………………………….
3,078,635
279,762
3,569,541
388,569
-14%
-28%
Prepaid .………………………………………………………………...
Globe Prepaid ………………………………………………………
TM ……………………………………………………………………
2,798,873
977,710
1,821,163
3,180,972
1,627,716
1,553,256
-12%
-40%
17%
1,191
1,223
-3%
Prepaid
Globe Prepaid………………………………………………………..
TM……………………………………………………………………..
150
92
171
101
-12%
-9%
Globe Postpaid………………………………………………………....
8,432
4,479
88%
-52%
-41%
2
ARPU
Globe Postpaid ………………………………………………………
31-Dec
31-Dec
2012
2011
Prepaid
Globe Prepaid………………………………………………………..
TM……………………………………………………………………..
Globe Postpaid…………………………………………………………
20
16
42
27
1.8%
1.5%
Prepaid
Globe Prepaid………………………………………………………..
TM……………………………………………………………………..
5.6%
6.2%
5.5%
6.5%
1
2012. Mobile telephony revenues are reflected under “Mobile Service Revenues” while wireless broadband revenues are included
under “Broadband.”
2
Globe ended the year with total mobile subscriber base of 33.1 million, up 10% over previous year‘s 30.0
million. Fourth quarter gross additions registered a quarterly-high of 6.7 million and were led by the
record acquisitions in Globe Prepaid and TM during the period. Full year 2012 gross additions, as a
result, rose 6% from 2011 level of 23.2 million to 24.6 million new SIMs. While churn rates were
maintained within manageable levels, the impact of the slowdown in acquisitions in the third quarter
163
weighed down full year 2012 net incremental subscribers to 3,078,635, 14% below 2011 level of
3,569,541 net additions.
Globe Postpaid
The postpaid segment accounted for 5% of the total mobile subscriber base. Globe Postpaid, which
remains the stronghold of the Company, continued to post robust acquisitions throughout the year.
™
®
Sales of the latest devices from Apple , Samsung, and BlackBerry also helped fuel acquisitions in the
segment which brought full year 2012 gross additions to a record 589,642, slightly up by 1% from
585,724 in 2011. With slightly elevated churn, full year net incremental postpaid subscribers of 279,762
were below the 2011 level of 388,569. Full year 2012 net acquisitions reflected as well the improving
quality of acquired subscribers with about 42% of regular postpaid net additions signing up for plans with
monthly service fees of P999 and above, compared to just 19% in 2011.
™
Globe capped off the year with the launch of the Apple iPhone 5 in the country. The latest device from
™
Apple continued to generate a strong following, which was likewise complemented by subscriber
®
availments of the latest gadgets from Samsung, BlackBerry , and Nokia. These fueled subscriber
acquisitions throughout the year and enabled the Company to post record additions in postpaid for 2012.
On the other hand, to address the needs of the Filipino traveler and at the same time improve its suite of
international services, Globe launched unlimited call, SMS, and mobile data roaming services such as
Bridge Data Roam Unlimited, Bridge Data Roam Unlimited Plus, Bridge Voice SMS Roam, and AllUnlimited Roaming in Thailand for on-the-go Filipinos in select destinations during the year. All these
initiatives translated to a year-on-year improvement in revenues and helped the Company to defend its
strong leadership position in this segment of the market.
Globe Postpaid ARPU of P1,191 was 3% below last year‘s P1,223 as a result of a higher mix of lowerMSF plans and the increase in subscriptions to the Company‘s value service offerings.
Globe Postpaid subscriber acquisition cost (SAC) increased substantially in 2012 mainly on higher
™
®
handset subsidies for subscriber availments of devices from Apple , Samsung and BlackBerry . Costs,
however, remain recoverable well within the 24-month contract period for postpaid subscribers.
Prepaid
total mobile subscriber base. As of the end of 2012, cumulative prepaid subscribers stood at about 31.4
million, 10% above the 2011 level of 28.6 million.
ranging from 3 days for P10 to 120 days for 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.
164
a. Globe Prepaid
Globe Prepaid comprised 50% of the total mobile subscriber base. Boosted by value-for-money
offerings that included the all-unlimited service GoUnli as well as All Unli Trio, All Net Combo, Immortal
Offers and Unli Tingi, and further reinforced by competitively-priced international services such as
GoTipIDD, full year gross acquisitions improved by 3% from about 11.4 million in 2011 to nearly 11.8
million in 2012. While churn rates were maintained at manageable levels, the third quarter decline
weighed down full year 2012 net incremental subscribers to 977,710, 40% below the 2011 level of
1,627,716 net incremental subscribers.
Globe Prepaid continued to offer the best value-for-money services to its subscribers. In 2012, Globe
introduced an easy way to connect and subscribe to Globe‘s latest promos with the launch of a selfservice menu where subscribers simply have to dial *143# to get a complete list of Globe‘s latest
offerings. To beef up its service offerings and be more competitive in the market, Globe Prepaid
introduced the following during the year: AllUnliTrio, All Net Combo, Immortal Trio, Immortal Txt, Unli
Tingi, and Go Unli. For its mobile browsing service, Globe Prepaid launched SuperFB, Social20, Fun20,
Mail20, and PowerSurf Megabytes to address growing demand and increasing mobile data usage. To
boost its international service offerings and help connect Filipinos with their loved ones, Globe Prepaid
re-launched one of its top-selling international call services and what used to be Super US Direct to
Globe Duo International. Globe also offered discounted IDD rates to select partners and popular
destinations with the launch of Go TipIDD and Go IDD.
Globe Prepaid ARPU declined by 12% year-on-year resulting from the revenue dilution from unlimited
and bucket service offerings. Globe Prepaid SAC, on the other hand, was below its 2011 levels due
mainly to lower ads and promo spending and remained recoverable within a month‘s ARPU.
b. TM
TM, which accounted for 45% of the total mobile subscriber base, generated the highest gross
acquisitions in the fourth quarter to bring full year total gross additions to about 12.3 million, up 9% from
11.2 million in 2011. TM benefited from the various product launches throughout the year that included
value service offerings such as TM Combo and the enhanced mobile browsing offers for TM which now
include SuperSurf, Social20, Mail20, and Fun20. With churn rates maintained within manageable levels,
full year net incremental subscribers increased by 17% from about 1.6 million in 2011 to 1.8 million.
TM marked the year with the launch of mobile browsing services to its subscribers. To complement the
growing number of smartphone users, TM subscribers may already subscribe to SuperFB, SuperSurf, as
well as Social20, Fun20, and Mail20 beginning in 2012. Duo International was also made available to
TM subscribers who wish to get connected with their loved ones in the US. On the other hand, TM
continued to improve as well its existing service offerings with TM Extend, which provides subscribers an
extra day of unlimited texts within the TM or Globe networks.
TM ARPU was down by 9% year-on-year with the continued shift from regular pay-as-you-use service to
unlimited and value offers. TM SAC, on the other hand, was below its 2011 levels due mainly to lower
ads and promo spending, and remained recoverable within a month‘s ARPU.
GCash
165
phone:











utility bills
insurance premiums
school tuition fees
online purchases
airline tickets
comes with an optional insurance coverage. With GCash PowerPay+, users enjoy mobile money
services like sending money, buying Globe or TM airtime load with a 10% rebate, and paying bills at the
speed of a text message without the need to cash-in to one‘s GCash account. It also allows 24/7
withdrawal from any of the 9,000 Automated Teller Machines (ATMs) nationwide, cashless shopping
through Megalink, BancNet and ExpressNet point of sale and financial assistance for accidental death
and burial assistance, life cover, residential fire, and ATM theft.
now has the largest remittance network in the country with more than 9,000 active GCash outlets
nationwide.
166
For electronic banking services, meanwhile, GCash secured a partnership with Philippine Savings Bank
eMoney Xchange service that will allow customers to link their UnionBank accounts to their GCash
To further complement its mobile wallet functions, Globe recently partnered with American Express® to
launch the GCash American Express® Virtual Card. The prepaid virtual card is linked to a subscriber‘s
GCash mobile wallet and allows users to shop conveniently online from both local and international
sites. Further, it gives the user a personalized US Address to allow delivery of purchases from
international online sites which may not be directly shipping goods to the Philippines.
167
In 2011, BPI Globe BanKo, Inc. launched an innovative product that does not only generate healthy
helping create a solid base for their savings and investments. Called the BanKo Social Initiative (BSI)
For the Year Ended
31-Dec
2012
Service
1
Broadband ..………………………………………………………
2
Fixed line Data ……………………………………………………
3
Fixed line Voice ….………………………………………………
Fixed Line and Broadband Service Revenues…….................
1
b)
c)
d)
16%
10%
-9%
9%
Monthly service fees of wired, fixed wireless, and fully mobile broadband data only and bundled voice and data
subscriptions;
Browsing revenues from all postpaid and prepaid wired, fixed mobile and fully mobile broadband packages in excess of
allocated free browsing minutes and expiration of unused value of prepaid load credits;
a)
b)
c)
d)
3
7,496
3,792
2,939
14,227
YoY
Change
a)
2
8,721
4,167
2,665
15,553
31-Dec
2011
a)
b)
c)
d)
e)
f)
g)
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.
2011 service revenues have been restated to reflect the change in the presentation of outbound revenues to be at gross
of interconnect expenses (from net previously).
168
Broadband
For the Year Ended
1
Wireless …………………………………………………………....
Wired………………………………………………………………….
Total (end of period)…………………………………………………
1
31-Dec
31-Dec
2012
2011
1,331,413
340,560
1,671,973
1,121,703
289,463
1,411,166
YoY
Change
(%)
19%
18%
18%
Globe Tattoo expanded its subscriber base by 18% from 1.4 million in 2011 to 1.7 million in 2012. Mobile
broadband solutions continued to enjoy popularity amongst customers with 77% of net additions for the
year opting for Tattoo On-The-Go products. Keeping up with wireless broadband growth, Tattoo DSL
subscribers increased 18% year-on-year to 340,560.
Subscriber volume driven growth propelled broadband revenues to P8.7 billion, P1.2 billion higher than
2011‘s P7.5 billion. Broadband revenues now comprise 11% of total gross service revenues, up from
10% in the previous year.
This was made possible by a line-up of products and services aimed at empowering subscribers to live
without limits. In the first part of the year, the Company launched LiveTattoo.ph, the first-ever online
lifestyle site in the country that allows Tattoo users to fuel their passion be it gaming, music, travel or
fashion via exclusive offers from over 50 partner establishments. In line with this, the new prepaid
dongles, Tattoo Prepaid Lifestyle Sticks do more than give surf speeds of up 7.2 Mbps powered by the
largest 4G network, it comes with freebies and perks designed for an individual‘s lifestyle. Globe Tattoo
also gave subscribers the power to surf by their own rules. With Tattoo Consumable Plans‟ lowest
browsing rate of P2.50 for 15 minutes and Supersurf, one can control how they consume their
broadband and stretch their Plan 299 and 499 to as much as 172 hours and 292 hours respectively.
Always at the forefront of broadband technology, Globe Tattoo rolled-out its LTE service last September.
Dubbed as the technology of the future, Long Term Evolution (LTE) delivers breakneck speeds in
internet connectivity. With Tattoo Black Plans 1799 and 2499, subscribers can enjoy speeds of up to 28
Mbps and 42 Mbps respectively.
Fixed Line Data
Globe Group
For the Year Ended
Fixed line Data
International …..……………………………………………………
Domestic …… ……………………………………………………..
1
Others ……………………………………………………………
Total Fixed line Data Service Revenues………………………..
1
31-Dec
31-Dec
2012
2011
899
1,958
1,310
4,167
956
1,730
1,106
3,792
YoY
Change
(%)
-6%
13%
18%
10%
Includes revenues from value-added services such as internet, data centers and bundled services.
Fixed line data also contributed to Globe‘s overall top line growth with revenues of almost P4.2 billion,
10% greater than the P3.8 billion booked in 2011. This was accomplished by the Company‘s innovative
169
business solutions and products that capitalized on demand for high-speed data nodes, transmission
links, bandwidth capacity and reliable service. Globe Business‘ products include M2M (machine-tomachine) solutions, cloud computing services, domestic and international data services, leased lines and
managed services among other solutions for improving a business‘ productivity and IT security.
Fixed Line Voice
Globe Group
For the Year Ended
31-Dec
31-Dec
2012
1
Cumulative Voice Subscribers – Net (End of period) ………
ARPU………………………………………………………………..
Average Monthly Churn Rate ..…………………………………..
1
2011
711,429
671,730
325
2.8%
395
2.8%
YoY
Change
(%)
6%
-18%
Includes DUO and SuperDUO subscribers.
Subscription to traditional landline service was slightly revived through low call rate offers and together
with DUO & SUPERDUO‟s continued popularity lifted cumulative voice subscriber base 6% to 711,429
customers. However, revenues still fell 9% to P2.7 million as the strategy lowered MSF and
consequently ARPU.
Globe Group
For the Year Ended
ILD Revenues and Minutes
31-Dec
2012
2011
YoY
Change
(%)
Total ILD Revenues (P Million) …………………………………….
12,653
13,344
-5%
Average Exchange rates for the period (P to USD1)……………
42.384
43.362
-2%
2,691
2,338
353
6.62
2,527
2,268
259
8.76
6%
3%
36%
1
Total ILD Minutes (in million minutes) ………………………….
Inbound……………………………………………………………….
Outbound.…………………………………………………………….
ILD Inbound / Outbound Ratio (x) ………………………………...
1
31-Dec
ILD minutes originating from or terminating to Globe and Innove networks.
In 2012, Globe and Innove unveiled the world‘s first-ever all-unlimited call, text and mobile browsing
roaming service. With Globe All-Unli Roam, postpaid subscribers can continue enjoying all three
unlimited services for only $40 per day. Also, because the Company is a member of the Bridge Alliance,
the alliance between 11 of Asia Pacific‘s leading mobile operators, Globe subscribers get easy access to
any of Bridge‟s roaming services by dialing *145#. Travelers to Asia Pacific countries can avail of Bridge
DataRoam Unlimited, an unlimited mobile surfing promo, for $10. Those going to the US, Europe or
China can register to Bridge DataRoam Unlimited Plus to use unlimited web browsing for $15 a day.
On top of these new roaming service, the Company continues to offer its OFW SIM packs and its
discounted and unlimited international call products such as IDD Sakto Calls (per-second IDD charging),
IDD Tingi (bundled IDD minutes), TipIDD (lowest per minute charging, now available from the *143#
170
menu), and Duo International (unlimited IDD calls). This wide range of roaming and international offers
are made possible by the strong partnerships Globe has forged with over 600 mobile operators
worldwide.
These services generate 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.
Combined ILD voice revenues for 2012 from the mobile and fixed line business went down 5% from
P13,344 million to P12,653 million caused by the 2% strengthening of the Philippine peso against the US
dollar coupled by the lower call rates offered by the above-mentioned products and services.
Total costs and expenses including depreciation for 2012 amounted to P
= 71,315 million, 16% higher than
2011‘s P
= 61,602 million. This reflects the elevated levels of marketing and subsidy, and network-related
expenditures spent throughout the year in order to acquire and retain subscribers and provide a better
and more resilient network. In addition to the rise in operating expenses, the continued accelerated
depreciation of assets rendered non-usable by the Company‘s network change-out increased
depreciation by 25% to P
= 23,584 million.
Costs and Expenses (P Million)
Globe Group
For the Year Ended
31-Dec
31-Dec
YoY
2012
2011
Change
Cost of sales…………………………………………………………….
Non-service revenues………………………………………………….
Subsidy………………………………………………………………….
7,679
3,704
3,975
5,888
3,753
2,135
30%
-1%
86%
Interconnect……………………………………………………………...
Selling, Advertising and Promotions ………………………………..
Staff Costs ………………………………………………………………
Utilities, Supplies & Other Administrative Expenses………………..
Rent………………………………………………………………………
Repairs and Maintenance……………………………………………..
Provisions
………………….…………………………………………………
Services and Others…………………………………………………...
Operating Expenses………………………………………………….
8,859
6,441
6,429
4,260
3,153
3,672
9,954
4,756
5,810
3,805
2,830
3,523
-11%
35%
11%
12%
11%
4%
1,604
9,338
43,756
1,790
8,058
40,526
-10%
16%
8%
Depreciation and Amortization ……………….…………………....
Affected by modernization…………………………………………..
Others…………………………………………………………………
1
Total Costs and Expenses ………………………………………...
23,584
5,080
18,504
71,315
18,941
18,941
61,602
25%
-2%
16%
1
Interconnect
Interconnect costs went down 11% from P9,954 million in 2011 to P8,859 this year following an NTCmandated lowering of the SMS access charge from P0.35 to P0.15 per SMS. As a result,
interconnection charges as a percentage of total subsidy and operating expenses declined from 23% to
19%.
171
Subsidy and Marketing
Subsidy and marketing, which comprise 22% of total subsidy and operating expenses, surged to
P10,416 million in 2012, 51% higher than the P6,891 million booked in the previous year. Subsidies
reached P3,975 million while selling, advertising and promotions rose to P6,441 million mainly driven by
increased handset issuances and higher subsidy per plan as the Company invested in subscriber
acquisition and retention, and other brand-building efforts. In addition to these, Globe also launched
several campaigns and promotions in order to defend against competition and increase share in
consumer spend.
Staff Costs
Staff costs grew P619 million to P6,429 million in 2012 caused by a larger headcount and its associated
employee-related benefits and incentives. Total headcount was at 5,872 at the end of 2012, up from
5,757 in 2011.
Staff costs represent 13% of total subsidy and operating expenses down from 14% in the previous year.
Utilities, supplies and other administrative expenses, including travel and transportation, rose 12% to
P4,260 million following higher charges for electricity, gasoline, airfare, and accommodations.
Rent
Lease charges for cell sites, international cable facilities, joint poles, IP ports and stores went up P
= 323
million to P
= 3,153 million on increased number cell sites, base stations, Globe facilities and Globe stores
coupled with higher rental rates.
Provisions
Provisions for the year, which include trade, traffic and non-trade provisions, dropped 10% to P
= 1,604
million following lower provisions for traffic and lower probable losses from advances to contractors and
vendors.
The Company incurred P
= 3,672 million in charges relating to the maintenance of Globe‘s hardware,
software and network facilities in 2012. This represents a 4% increase from last year‘s spending
proportionate with the growth of Globe‘s network. Globe‘s cell sites and base stations totaled 20,338 as
of December 2012, 4% more than in 2011.
Services and Others
Services and other expenses increased 16% to P
= 9,338 million coming from engaging more contracted
services both for day-to-day operations and the ongoing network modernization and paying higher fees
for taxes, licenses and royalties. Consequently, services and other expenses for the year comprised
20% of total subsidy and operating expenses, up from 19% in the previous year.
Depreciation costs for the year amounted to P
= 23,584 million, up 25% from 2011‘s P
= 18,941 million. As
the Company had disclosed in the past, the carrying value of the old, non-usable assets would impact
Globe‘s profit and loss statement through an acceleration of depreciation over it remaining useful life and
until such time when the new, replacement assets are ready for service. The impact of accelerated
172
depreciation in 2012 amounted to P5,080 or 22% of total depreciation. Excluding this item, depreciation
would have been down 2% from P
= 18,941 million to P
= 18,504 million.
NON-OPERATING CHARGES
income, and net property and equipment-related income (charges) as shown below:
Globe Group
For the Year Ended
Non-operating Income / Expense (P Million)
Interest Expense…………………………………………………...
Gain / (Loss) on derivative instruments…………………………
Swap costs and other financing costs…………………………...
Foreign Exchange (loss) / gain – net…………………………….
31-Dec
31-Dec
YoY
2012
2011
Change
(2,086)
(75)
(183)
318
(2,026)
(2,059)
25
(211)
(309)
(2,554)
1%
-400%
-13%
-203%
-21%
Interest Income ……………………………………………………..
Others – net………………………………………………………….
580
(213)
297
191
95%
-212%
Total Other Expenses………………………………………………
(1,659)
(2,066)
-20%
At end-December 2012, the Globe group‘s non-operating charges decreased by 20% year-on-year from
about P2.1 billion to P1.7 billion. This was driven mainly by higher foreign exchange gains and interest
income realized in 2012 than in the previous year (See related discussion on derivative instruments and
swap costs in the Foreign Exchange and Interest Rate Exposure section).
Interest expense was slightly up in 2012 mainly on increased borrowings to support the network
modernization and IT transformation projects. Interest expense in 2012 also included payment for the
early redemption of the Company‘s fixed rate bonds originally maturing 2014. On the other hand,
interest income almost doubled from 2011 to 2012 driven partly by investments in higher-yielding
instruments as well as interest on BTI-related bonds.
173
Globe Group
31-Dec
31-Dec
2012
2011
Total Assets1 …………………………………………………….
Total Debt2 …………………………………………………………
Total Stockholders‘ Equity1 …………………………………….
148,433
61,779
46,755
130,839
48,679
48,428
Total Debt to EBITDA ……………………………………………
Debt Service Coverage…………………………………………
Interest Cover (Gross) …………………………………………
Debt to Equity (Gross) …………………………………………
3
Debt to Equity (Net) …………………………………………….
Total Debt to Total Capitalization (Book) ………………………
Total Debt to Total Capitalization (Market) ...………………….
1.76
2.02
12.10
1.32
1.18
0.57
0.30
1.39
3.10
13.24
1.01
0.90
0.50
0.25
YoY
Change
(%)
13%
27%
-3%
1
2
3
bank covenants albeit higher year-on-year with additional debt raised as a result of Globe‘s
transformation initiatives.
Globe Group‘s consolidated assets in 2012 amounted to P
= 148,433 million compared to P
= 130,839 million
in 2011. Consolidated cash, cash equivalents and short term investments (including investments in
assets available for sale and held to maturity investments) was at P6,760 million in 2012 compared to
P5,159 million in 2011.
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 1.32:1 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 1.18:1 compared to 0.90:1 in
2011.




1
2
As of December 31, 2012, Globe is well within the ratios prescribed under its loan agreements.
1
174
2
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 2012.
Globe Group
Net Cash from Operating Activities………………………………
31-Dec
2012
(Audited)
24,237
31-Dec
2011
(Audited)
29,926
Net Cash from Investing Activities……………………………….
(24,633)
(18,190)
35%
Net Cash from Financing Activities………………………………
2,198
(12,521)
-118%
(P Million)
YoY
change
(%)
-19%
Net cash flows provided by operating activities in 2012 stood at P24,237 million, down 19% year-on-year
driven by the increase in advances to suppliers and contractors related to the various projects being
undertaken.
Meanwhile, net cash used in investing activities amounting to P24,633 million was up 35% driven largely
by investments in property and equipment resulting from the network modernization projects and
ongoing efforts to expand the coverage and capacities of the Company‘s broadband network and
improve the quality of its mobile service. Consolidated capital expenditures in 2012 amounted to
P26,810 million, up 54% from the 2011 level of P17,417 million.
Globe Group
(P Million)
Capital Expenditures (Cash) ……………………………………….
Increase (decrease) in Liabilities related to Acquisition of PPE &
capitalized asset retirement obligation and borrowing cost …
1
Total Capital Expenditures ………………………………………
2
Total Capital Expenditures / Service Revenues (%)……………
21,085
18,744
YoY
change
(%)
12%
5,725
(1,327)
-531%
26,810
17,417
54%
32%
22%
31-Dec
31-Dec
2012
2011
1
2
2011 service revenues have been restated to reflect the change in the presentation of outbound revenues to be at gross of
For 2013, Globe has earmarked about US$550 – 650 Million in capital expenditures. This consists of
US$160 – 210 Million for transformation initiatives and about US$290 Million for business as usual
spend for provisions for fixed line data investments, international cable facilities, and IT infrastructure.
Other capital expenditures for 2013 also include carryover spend of about US$100 Million from 2012.
Consolidated net cash from financing activities generated an inflow of P2,198 million in 2012 compared
to the net cash outflow of P12,521 million in 2011. This was driven largely by the bond issuance and
borrowings from banks to fund the Company‘s network modernization and IT transformation program as
well as finance business-as-usual capital expenditure requirements. The 2012 inflow was partially offset
by payments of cash dividends as well as short-term and long-term loan repayments. Consolidated debt
increased by 27% from P48,679 million in 2011 to P61,779 million in 2012.
Out of the total debt, 13% are denominated in US$. There were no outstanding currency hedges on
debt as of December 31, 2012.
175
debt as of 31 December 2012:
Year Due
2013 ……………………………………………………………………………………………………………
2014…………………………………………………………………………………………………………….
2015…………………………………………………………………………………………………………….
2016 ……………………………………………………………………………………………………………
2017 through 2022……………………………………………………………………………………………
Total…………………………………………………………………………………………………………….
Principal
*
(US$ Mn)
287
164
207
65
789
1,512
In January 2012, Globe Telecom, Inc. signed a ten-year, US$90-Million floating rate term loan facility
with China Banking Corporation as lender to finance capital expenditures for 2012, which includes the
Company‘s US$790 Million investment for its five-year massive network modernization and IT
transformation program to boost voice and data capacity in anticipation of the growing demand for
broadband and mobile data use.
In the second quarter, Globe successfully issued its P4.5 billion five-year and P5.5 billion seven-year
fixed rate bonds due 2017 and 2019, respectively, to help fund the Company‘s ongoing network
modernization and IT transformation program as well as finance other capital expenditure requirements
for the year.
In September this year, Globe signed a P2.0 billion ten-year, fixed-rate term loan facility with The
Philippine American Life and General Insurance Company, The Insular Life Assurance Company, Ltd.
And Sunlife of Canada (Philippines), Inc. to refinance a portion of the Company‘s debts and to fund
capital expenditures for 2013.
Stockholders‘ equity at the end of 2012 stood at P46,755 million, 3% below the P48,428 million level in
2011. Globe‘s capital stock as of December 31, 2012 consists of the following:
Preferred Shares
th
preferred share;
th
i. No preemptive right to any share issue of Globe Telecom, and subject to yield protection in case
176
The dividends for preferred shares are declared upon the sole discretion of the Globe Telecom‘s
BOD.
As of June 29, 2011, none of the preferred shares have been converted to common shares.
Common Shares
Common shares at par value of P50 per share of which 132 million are issued and outstanding out of a
Cash Dividends
On February 5, 2013, the Board of Directors approved the declaration of the first semi-annual cash
dividend of P33.50 per common share, payable to shareholders on record as of February 19, 2013.
Total dividends of about P4.4 billion will be paid on March 12, 2013. On an annualized basis, the first
semester dividend distribution represents 86% of 2012 core net income.
Consolidated Return on Average Equity (ROE) registered at 14% in 2012 compared to 21% in 2011
using net income and based on average equity balances for the year ended. Using core net income to
strip out the effects of accelerated depreciation on net income, return on average equity in 2012 was up
at 22% compared to 21% in 2011.
Accordingly, consolidated basic earnings per common share were P51.54 and P74.02, while
consolidated diluted earnings per common share were P51.47 and P73.77 for the years ended 31
December 2012 and 2011, respectively.
Financial Risk Management
1
revenues were at 21% and 24% of total service revenues for the periods ended 31 December 2012 and
177
2011, respectively. In contrast, Globe‘s foreign-currency linked expenses were at 10% and 8% of total
operating expenses for the same periods ended, respectively.
2012
P15.4 billion
P3.4 billion
P0.157 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.
Realized gains from forward contracts that matured in 2012 amounted to P21.29 million. There were no
outstanding forward contracts as of December 2012.
follows:
US$ Assets
US$ Liabilities
December 2012
US$215 million
US$376 million
US$161 million
the end of each reporting period. Given the net US$ liability position, an appreciation of the peso results
in a revaluation or forex gain in our P&L. As of December 2012, the Philippine Peso stood at P41.078 to
the US dollar, an increase versus the 2011 year-end rate of P43.919. The Globe Group charged a total
of P318 million in net foreign exchange gains to current operations for the year of 2012.
Globe enters into swaps and forward contracts to hedge the FX risks on its US$ capex and debt
payments. The Globe Group charged a total of P11.75 million in losses from these instruments as of
December 2012. As at end-December 2012, however, there are none of these outstanding forwards or
swaps.
The swap and forward contracts are not designated as hedges for accounting purposes. (Please refer to
Notes 28.3 and 28.6 of the attached Notes to Financial Statements).
As of end-December 2012, Globe has a total of US$45.17 million and P6.19 billion in interest rate swap
contracts that were entered into to achieve these targets. The US$ and Peso interest rate swaps fixed
some of the Company‘s outstanding floating rate debts with quarterly or semi-annual payment intervals
up to September 2015.
As of end of December 2012, 59% of peso debt is fixed, while 31% of US$ debt is fixed after swaps.
178
The MTM of the interest rate swap contracts stood at a loss of P215.24 million as of end-December
2012.
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).
derivative instruments. As of 31 December 2012, the MTM value of the derivatives of the Globe Group
amounted to a loss of P215.24 million while loss on derivative instruments arising from changes in MTM
reflected in the consolidated income statements amounted to P53.52 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 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 US$/P rate as it
specifically pertains to the revaluation of the net unhedged liability position of the company, and foreign
exchange derivatives.
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MANAGEMENT
BOARD OF DIRECTORS
As of April 8, 2014, the members of the Board of Directors of the Globe Group are:
Name
Mark Chong Chin Kok
Ernest L. Cu
Romeo L. Bernardo
Delfin L. Lazaro
Tay Soo Meng
1
Rex Ma. A. Mendoza
Manuel A. Pacis
1
Position
Chairman
Co-Vice Chairman
Co-Vice Chairman
Director, President and Chief Executive Officer
Director
Director
Director
Director
Independent Director
Nominated as Independent Director for election during the Annual Stockholders’ Meeting on April 8, 2014.
Jaime Augusto Zobel de Ayala, Mr. Zobel, 54, Filipino, has served as Chairman of the Board since
December 1996 and a Director since March 1989. He is the Chairman and CEO of Ayala Corporation.
He also holds the following positions: Chairman of Bank of the Philippine Islands, and Integrated MicroElectronics, Inc.; Co-Chairman of Ayala Foundation, Inc.; Vice Chairman of Ayala Land, Inc. and AC
Energy Holdings, Inc.; Chairman of Harvard Business School Asia-Pacific Advisory Board and Asia
Business Council; Vice Chairman of the Makati Business Club, and member of the Harvard Global
Advisory Council, Mitsubishi Corporation International Advisory Committee, JP Morgan International
Council, International Business Council of the World Economic Forum; Philippine Representative for
APEC Business Advisory Council. He graduated with B.A. in Economics (with honours) degree from
Harvard College in 1981 and obtained an MBA from the Harvard Graduate School of Business in 1987.
Gerardo C. Ablaza, Jr. Mr. Ablaza, 60, Filipino, has served as Director since June 1997. He 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 also serves as director for Azalea International Ventures
Partners, AsiaCom Philippines, Inc., LiveIt Investment Ltd.; AC Energy Holdings, Inc., Ayala
Foundation, Inc. and AG Holdings Limited. Mr. Ablaza is currently the President and CEO of Manila
Water Company where he is responsible for overseeing the financial and operational growth within
Manila Water‘s service areas in the Metro Manila east zone and in its expansion areas. From 1998 to
April 2009, Mr. Ablaza was the President and CEO of Globe Telecom, Inc. During this period, he took
the company from being the fourth-ranked mobile services provider to the second-largest full-service
telecom operator with a subscriber base of 25 million in 2008. Before joining the Ayala Group, Mr.
Ablaza was Vice-President and Country Business Manager for Philippines and Guam of Citibank, N.A.
for its Global Consumer Banking Business. Prior to this, he headed the Credit Payments Products
Division of Citibank, N.A. Singapore. In 2004, Mr. Ablaza was recognized by CNBC as the Asia
Business Leader of the Year, making him the first Filipino CEO to win the award. In the same year, he
was awarded by Telecom Asia as the Best Asian Telecom CEO. In 2013, he was recognized for his
consistent leadership and innovation across the banking, investment, telecommunications and utility
service industries through the Citi Distinguished Alumni Award for Leadership and Ingenuity. He is the
first and the only Filipino to be awarded with such an honor. Mr. Ablaza graduated summa cum laude
from the De La Salle University in 1974 with a degree in Liberals Arts, Major in Mathematics (Honors
Program). As one of the most accomplished graduates of his alma mater, he sits as a member of the
Board of Trustess in various De La Salle schools in the country.
Ernest L. Cu. Mr. Cu, 53, Filipino, has served as Director since April 2009. He is currently the
President and Chief Executive Officer of Globe Telecom, Inc. Mr. Cu joined Globe in October 2008 as
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Deputy CEO, and was officially appointed President and Chief Executive Officer on 2 April 2009. Since
then, he has been passionately driving a sweeping transformation across the company, ultimately to
deliver the superior customer experience, anchored on his primary advocacy of Customer First. Under
Mr. Cu‘s visionary leadership, Globe has progressively risen as a fierce challenger that has successfully
wrestled significant market share from competition. In 2010, he was adjudged Best CEO by Finance
Asia and was moreover conferred the International Association of Business Communicators (IABC) CEO
EXCEL award for communication excellence in telecom and IT. In 2012, Mr. Cu earned international
accolade as CEO of the Year by Frost & Sullivan Asia Pacific. In 2013, Ernest was the highest ranked
Filipino in the Power 100 of London-based Global Telecoms Business Magazine that recognizes the 100
most influential telecom leaders worldwide. Prior to joining Globe, he was the President and Chief
Executive Officer of SPI Technologies, Inc., where he received the Ernst & Young ICT Entrepreneur of
the Year award in 2003. Mr. Cu earned his Bachelor of Science in Industrial Management Engineering
from De La Salle University in Manila, and his Master of Business Administration from the J.L. Kellogg
Graduate School of Management, Northwestern University.
Romeo L. Bernardo. Mr. Bernardo, 59, Filipino, has served as Director since September 2001. He is
Managing Director of Lazaro Bernardo Tiu and Associates (LBT), a financial advisory firm based in
Manila. He is also a GlobalSource economist in the Philippines. He is 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,
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.). 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
from Williams College in Williamstown, Massachusetts.
Delfin L. Lazaro. Mr. Lazaro, 66, 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 Micro-Electronics, 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 successive high growth levels up to the Asian crisis in 1997.
Tay Soo Meng. Mr. Tay, 64, Singaporean, was elected as Director on 8 February 2011. Mr. Tay is the
Group Chief Technology Officer of Singapore Telecommunications Limited (SingTel) since September
2012. He is responsible for the networks strategy, procurement, planning and operations across both
Singapore and Australia (Optus). He also provides engineering support for SingTel‘s joint venture
partners: India (Bharti), Philippines (Globe), Thailand (AIS), and Indonesia (Telkomsel). Prior to this, Mr.
Tay was the Managing Director for Optus Networks from 2008 and returned to Singapore as Managing
Director, Networks from 2010. Mr. Tay has supported many SingTel‘s interest across Europe, Mauritius,
Norway, Sri Lanka, and Vietnam assisting in the divestment of these operations to focus SingTel in
becoming Asia‘s leading operator. He is a member of the Board of Directors of Next Generation Mobile
Networks (NGMN) Ltd. since July 2013. The strategy for NGMN, an alliance of mobile network
operators is to drive industry leadership in early standardization process on key mobile technologies. He
was the GSM Association‘s Asia Pacific Chairman in 1997, and was responsible for looking after the
interests of GSM operators in the Asia Pacific region. Mr. Tay holds an MBA degree from the University
of Leicester (England).
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Fernando Zobel de Ayala. Mr. Zobel, Filipino, 53, has served as Director since October 1995. He is
the President and Chief Operating Officer of Ayala Corporation since April 2006. He is also Chairman of
Ayala Land, Inc., Manila Water Company, Inc., AC International Finance Ltd., AC Energy Holdings, Inc.,
and Hero Foundation, Inc.; Co-Chairman of Ayala Foundation, Inc.; Director of Bank of The Philippine
Islands, Integrated Micro-Electronics, Inc., LiveIt Investments, Ltd., Ayala International Holdings Limited,
Honda Cars Philippines, Inc., Isuzu Philippines Corporation, Pilipinas Shell Petroleum Corp., Manila
Peninsula and Habitat for Humanity International; Member of The Asia Society, INSEAD East Asia
Council, Chairman of Habitat for Humanity's Asia-Pacific Capital Campaign Steering Committee; and
Member of the Board of Trustees of Caritas Manila, Pilipinas Shell Foundation, Kapit Bisig para sa Ilog
Pasig Advisory Board and National Museum.
Rex Ma. A. Mendoza. Mr. Mendoza, 51, Filipino, is the President and Chief Executive Officer of The
Philippine American Life and General Insurance Company (Philam Life). He is also Chairman of The
Philam Foundation, Inc. and Vice Chairman of BPI Philam Life Assurance Company, Chairman and
President of Rampver Financials, and Director of Philam Properties Corporation, Tower Club, Inc., The
Freeport Area of Bataan and Esquire Financing, Inc. Prior to rejoining Philam Life, he was Senior Vice
President and Chief Marketing and Sales Officer of Ayala Land, Inc. He was also Chairman of Ayala
Land International Sales, Inc., President of Ayala Land Sales, Inc., and Avida Sales Corporation. He
currently serves as Director of the Anvaya Beach and Nature Club, President of Abrio in Nuvali, and is a
member of the Globe Advisory Council. He has a Master‘s Degree in Business Management with
distinction from the Asian Institute of Management and was one of the 10 Outstanding Graduates of his
batch at the University of the Philippines where he obtained a BSBA degree with a double major in
marketing and finance. He was awarded Most Distinguished Alumnus of the University of the Philippines‘
Cesar E.A. Virata School of Business last December 2013. He is also a fellow with distinction at the Life
Management Institute of Atlanta, Georgia, USA, a Registered Financial Planner and a four-time member
of the Million Dollar Round Table. Rex was a professor of Marketing and Computational Finance at the
De La Salle University Graduate School of Business. He taught strategic marketing, services marketing
and services strategy. He has served as Chairman of the Marketing Department and was awarded as
one of the University‘s most outstanding professors.
Guillermo D. Luchangco. Mr. Luchangco, 74, Filipino, has served as Independent Director since
September 2001. He is also Chairman and Chief Executive Officer of various companies of the ICCP
Group, including Investment & Capital Corporation of the Philippines, Science Park of the Philippines,
Inc., Pueblo de Oro Development Corp., Cebu Light Industrial Park, Inc., Regatta Properties, Inc., and
RFM-Science Park of the Philippines, Inc.; ICCP Venture Partners, Inc. and Manila Exposition Complex,
Inc.; Chairman and President of Beacon Property Ventures, Inc.; Independent Director of Phinma
Corporation, Trans-Asia Oil & Energy Development Corporation. and Roxas & Co., Inc.; and a regular
Director of Ionics, Inc. and Ionics EMS, Inc.
Manuel A. Pacis. Mr. Pacis, 69, Filipino, has served as Independent Director since April 2011. He was
formerly a Vice President for Finance of the Procter & Gamble Company (P&G) in Cincinnati, Ohio. He
held positions of increasing responsibility in the Philippines, the US, Mexico, China, and Japan including
Chief Financial Officer of P&G Asia, and a Global Business Unit (GBU). He also served as Vice
President for Internal Controls Worldwide and Financial Systems Worldwide at P&G. His wide-ranging
experiences throughout his business career have included leadership roles in corporate governance,
strategic planning, internal audit, management systems / IT, M&A, joint ventures, and finance &
accounting.
Mark Chong Chin Kok. Mr. Chong, 50, Singaporean, previously served as a Director for one year, from
6 October 2009 to 8 October 2010. He was elected again as Director at the Annual Stockholders'
Meeting on 16 April 2013. Mr. Chong was appointed CEO of International, Group Consumer, of
Singapore Telecommunications Limited (SingTel) on 14 January 2013 to oversee the growth of SingTel
Group‘s international affiliates, strengthen its relationship with overseas partners, and drive regional
initiatives for scale and synergies. Prior to this appointment, he was Chief Operating Officer of
Advanced Info Service Plc (AIS), the Group‘s associate in Thailand, in charge of sales and marketing
products, network operations, IT solutions, customer and services management. Mr. Chong graduated
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with a Bachelor of Electronics Engineering and Master in Research in Electronic Systems from
ENSERG, Grenoble, France, and obtained his Master of Business Administration from the National
University of Singapore. He is also a senior fellow with the Singapore Computer Society.
1
Mr. Mendoza was nominated as an independent director to replace Mr. Loinaz, who is not seeking re-election.
KEY OFFICERS (AS OF MARCH 31, 2014)
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. The table below shows the
name and position of our key officers as of 31 March 2014.
Key Officers – Globe
Name
Ernest L. Cu
Alberto M. de Larrazabal
Henry Rhoel R. Aguda
Vicente Froilan M. Castelo
Marisalve Ciocson-Co
Rebecca V. Eclipse
Gil B. Genio
Carmina J. Herbosa
Renato M. Jiao
Bernard P. Llamzon
Solomon M. Hermosura
1
Position
President and Chief Executive Officer
Chief Finance Officer
Chief Information Officer and SVP, Information Systems Group
General Counsel and SVP, Corporate and Legal Services Group
Compliance Officer and Assistant Corporate Secretary and VP, Legal
Services
Chief Customer Experience Officer and EVP, Office of Strategy
Management
Chief Operating Officer for Business and International Markets and Chief
Strategy Officer
Chief Audit Executive and SVP, Internal Controls Group
Chief Human Resource Officer
EVP, Consumer Sales
Corporate Secretary
Member, Board of Directors.
Consultants
Name
Position
Peter Bithos
Chief Operating Advisor
Chee Loo Fun
Rodolfo A. Salalima
Robert Tan
Senior Adviser for Consumer Marketing
Chief Legal Counsel and Senior Advisor
Chief Technical Advisor
Alberto M. de Larrazabal. Mr. de Larrazabal, 58, Filipino, is the Chief Finance Officer. 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.
Henry Rhoel R. Aguda. Mr. Aguda, 45, Filipino, is the Chief Information Officer. Mr. Aguda is a
veteran in the IT profession. Prior to joining Globe, Mr. Aguda was the Chief Technology Officer and
Senior Vice-President for the IT Group of the Government Service Insurance System (GSIS), and was
awarded the 2010 ASEAN CIO of the Year for the Government Sector by the International Data Group.
He also held such positions as Group Chief Information Technology Officer of Digitel
Telecommunications Philippines, Vice President for Asia Pacific of Nextel Communications Philippines
and held key executive positions in Fujitsu Philippines, BTI, and Computer Information Systems Inc. Mr.
Aguda earned his Bachelor of Science in Mathematics from the University of the Philippines in 1988. He
also obtained his juris doctor Degree from the University of the Philippines in 2008, graduating cum
183
laude and class valedictorian. Mr. Aguda was also a participant in the Strategic Alliance Program of the
Wharton School of Business in the University of Pennsylvania.
Vicente Froilan M. Castelo. Mr. Castelo, 49, Filipino, has served as General Legal Counsel and Head
of the Corporate and Legal Services Group of Globe since April 2011. He is a veteran in the practice of
law, and is one of the pioneers in the practice of Law in the telecommunications and information
communication technology field. He earned his Bachelor of Laws from San Beda College and is the
President of the Telecommunications and Broadcast Attorneys of the Philippines. He joined Globe
Telecom as the Head of Regulatory Affairs in July 1998.
Marisalve Ciocson-Co. Ms. Co, 43, Filipino, has served as Compliance Officer and Assistant
Corporate Secretary of Globe since July 2010. She is also the Vice President 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-Diliman and received her Juris Doctor
(Law) degree from Ateneo de Manila University College of Law.
Rebecca V. Eclipse. Ms. Eclipse, 51, Filipino, is the Head of Office of Strategy Management and Chief
Customer Experience Officer. She joined Globe in March 1995. Ms. Eclipse has more than 15 years of
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.
Gil B. Genio. Mr. Genio, 54, Filipino, is the Head of Corporate Strategy and Business Development,
responsible for strategy formulation and driving new initiatives. He is concurrently the Head of
International and Business Markets, which are the groups responsible for sales, relationships, marketing,
products and support Globe‘s overseas Filipino and service provider customers, and for business
customers from SMEs to the largest enterprises. Mr. Genio is also the CEO of wholly-owned
subsidiaries - Innove Communications and GTI Business Holdings, as well as board member of GExchange, Globe Telecom HongKong Ltd, Globetel European Ltd. and Kickstart Ventures. Mr. Genio
joined Globe in July 1997. Among his previous assignments in Globe was Chief Financial Officer,
followed by stints as group head for fixed networks, carrier services, and business customers. He is a
Managing Director at Ayala Corporation. Prior to joining Globe and AC, Mr. Genio had spent more than
11 years with Citibank in the Philippines, Singapore, Japan and Hong Kong, with stints in financial
control, risk management, product development, audit and market risk management. Mr. Genio
obtained a Masters in Business Management, graduating With Distinction, from the Asian Institute of
Management. He holds a Bachelor of Science degree in Physics, magna cum laude, from the University
of the Philippines.
Carmina J. Herbosa. Ms. Herbosa, 47, Filipino, is the Head of Internal Audit. She joined Globe in
February 2012. Ms. Herbosa is a Certified Public Accountant, a Certified Internal Auditor (US CIA) and
a Certified Control Self-Assessment Auditor (US CCSA). Ms. Herbosa has more than 15 years of
financial and audit experience having held management positions in Procter & Gamble in Asia, Europe,
and the US. Prior to joining Globe, Ms. Herbosa was based in China as Senior Director for Internal Audit
for Asia and EMEA of Whirlpool Corporation. Ms. Herbosa earned her Bachelor of Science in Business
Administration and Accountancy, cum laude, from the University of the Philippines, and her Master of
Business Administration from the Kellogg School of Management, Northwestern University.
Renato M. Jiao. Mr. Jiao, 57, Filipino, is the Head of Human Resources. He joined Globe in June
2010. Mr. Jiao has over 30 years of experience in general management and leveraging leading-edge
technologies, processes and human capital for competitive advantage. He is a seasoned HR Practitioner
with 15 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.
184
Bernard P. Llamzon. Mr. Llamzon, Filipino, assumed the position of Head of Consumer Sales Division
in August 2012. He joined Globe in October 2006 to handle Sales and Distribution for wireless products
and has since then created a track record of operational excellence and effective execution. Mr.
Llamzon is a veteran in the field of Sales and Distribution with significant contributions in the beverage,
tobacco and telecommunications industries. Deriving from 27 years of experience, he possesses broad
and deeply-applied knowledge on all sales channel types, practices the disciplines of a global company,
has a well-developed local network, and has tested leadership over a large sales organization. Mr.
Llamzon holds a bachelor‘s degree in Commerce, major in Business Management, and has attended the
Management Development Program of the Asian Institute of Management and INSEAD‘s World Class
Business Manager Program.
Solomon M. Hermosura. Mr. Hermosura, 51, 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 its Management Committee and the Ayala Group Management Committee. He is the General
Counsel, Corporate Secretary and Compliance Officer of Ayala Corporation, and the CEO of Ayala
Group Legal. He also serves as Corporate Secretary of Ayala Land, Inc., Manila Water Company, Inc.,
Integrated Micro Electronics, Inc., Ayala Foundation, Inc., and a number of other companies in the Ayala
Group; and as member of the Boards of Directors of a number of companies in the Ayala Group. Mr.
Hermosura graduated valedictorian with Bachelor of Laws degree from San Beda College in 1986 and
placed third in the 1986 Bar Examinations.
Peter Bithos. Mr. Bithos, 42, American, is the Chief Operating Advisor. He joined Globe in May 2010.
Prior to Globe, Mr. Bithos spent five years with SingTel Optus in Australia where he was most recently
the Chief Executive Officer of Optus‘ subsidiary Virgin Mobile Australia. Over his tenure at SingTel
Optus, Mr. Bithos held executive positions cutting across P&L leadership, operations, strategy and M&A.
Prior to SingTel Optus, he spent nine years at the top-tier strategy firm of Bain & Company as a senior
engagement leader in strategy development and turnaround projects for Fortune 500 companies in
North America, Australia and Asia.
Chee Loo Fun. Ms. Chee, Malaysian, is the Senior Advisor for Consumer Marketing. She joined Globe
in May 2011. Ms. Chee has had over 20 years of professional and executive-level experience in both
telecommunications and advertising industries specializing in brand management and consumer
marketing. Prior to joining Globe, she spent over 11 years with Maxis Communications Berhad
formulating end-to-end integrated marketing strategies including line management of staff in retail,
establishing operational efficiencies and process governance, and leading teams through rapid change.
Ms. Chee was also a Director of Client Service of J. Walter Thompson where she created and led
integrated marketing communication strategies for key accounts.
Rodolfo A. Salalima. Mr. Salalima, 66, Filipino, is the Chief Legal Counsel and Senior Advisor. He
joined Globe in 1993. Before his current appointment, Mr. Salalima was Globe‘s Senior Vice President
and Head of 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, Chairman 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) and Innove Communications, Inc. He earned
his Bachelor of Laws degree, CUM LAUDE, and Bachelor of Arts degree (Philosophy), Magna Cum
Laude, both from the San Beda College, Manila.
Robert Tan. Mr. Tan, Singaporean, is the Chief Technical Advisor since December 2010. He is now
actively driving the rollout of Globe‘s large-scale wireless network modernization undertaking. Mr. Tan
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
185
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.
SIGNIFICANT EMPLOYEES
The Company considers all its employees to be significant partners and contributors to the business.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Directors, Officers - 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;
(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.
COMPENSATION OF DIRECTORS AND OFFICERS
Directors
Article II Section 6 of the Company‘s By-Laws provides:
―SECTION 6. COMPENSATION OF DIRECTORS - Directors as such may receive, pursuant to a
resolution of the stockholders, fees and other compensation for their services as directors, including,
without limitation, their services as members of committees of the Board of Directors (As amended on
April 12, 2011).‖
The stockholders have ratified a resolution in 2003 fixing the per-diem remuneration of P100,000 for
non-executive Directors for every meeting actually attended as a director or as a member of a Board
Committee. Additionally, executive directors do not receive per-diem remuneration.
During the Annual Stockholders‘ Meeting held on April 8, 2014, the shareholders approved the increase
of the per diem for non-executive Board members to P200,000 per board meeting, while retaining the
per diem for committee meetings at P100,000. Additionally, executive directors do not receive per diem
remuneration. Per diem for attendance in committee meetings or any other meetings will remain the
same. Projected earnings based on this proposed rate will add up to an estimate of P2.4 million to P3.0
million. This will align Globe with industry standard for Board Meetings.
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.
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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 P158 million in 2013 and P142 million in 2012.
The projected total annual compensation for 2014 is P170 million.
The total annual compensation paid to all senior personnel (Executives) of the Company (excluding its
subsidiaries) amounted to P1,600 million in 2013 and P1,366 million in 2012. The projected total annual
compensation for 2014 is P1,737 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
Ernest L. Cu1
President & Chief Executive Officer
Alberto M. de Larrazabal1
Chief Financial Officer & Treasurer
Rebecca V. Eclipse1
Head – Office of Strategy Management
Gil B. Genio1
Head – Business Customer Facing Unit
and President – Innove
Communications, Inc.
Renato M. Jiao1
Head – Human Resources
CEO & Most Highly Compensated
Executive Officers
All other officers 2 as a group unnamed
Year
Actual 2012
Actual 2013
Projected 2014
Actual 2012
Actual 2013
Projected 2014
1
CEO & Most Highly Compensated Executive Officers
2
All Other Executives
3
Inclusive of guaranteed bonus, variable pay and other earnings
Salary
(in P Millions)
Other Variable
3
Pay
(in P Millions)
75
82
88
837
976
1,058
67
76
82
529
624
679
The above named executive officers are covered by Letters of Appointment with the Company stating
therein their respective job functionalities, among others.
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.
Warrants and Options Outstanding:
187
The Company offered the Executive Stock Option Plan (ESOP) to the Company‘s directors and
officers including key officers of its subsidiaries since April 2003. Of the below named directors and
officers, there were 99,100 common shares exercised in 2013.
Name
Position
Ernest L. Cu
Alberto M. de
Larrazabal
Rebecca V. Eclipse
Gil B. Genio
Renato M. Jiao
No. of
Shares
Date of
Grant
Ave Price
at date of
grant
(Offer
Price)
Ave Price
(Exercise
Price)
Balance of
outstanding &
exercisable
options at
end of period
99,100
2006,
2007,
2008 &
2009
1,063
1,457
164,000
President and Chief
Executive Officer
Chief Financial
Officer and
Treasurer
Head – Office of
Strategy
Management
Head – Business
Customer Facing
Unit and President –
Innove
Communications,
Inc.
Head – Human
Resources
All above-named Officers as a Group
The Company has not adjusted nor amended the exercise price of the options previously awarded to the
above named officers.
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.
The following are the stock option grants to key executives and senior management personnel of the
Globe Group under the ESOP from 2003 to 2009:
Date of Grant
April 4, 2003
Number of
Options
Granted
Exercise Price
680,200 P
= 547.00 per share
Fair Value
Exercise Dates
of each Option
50% of options exercisable
P
= 283.11
from April 4, 2005 to April 14,
2013; the remaining 50%
exercisable from April 4, 2006
to April 14, 2013
Fair Value
Measurement
Black-Scholes
option pricing
model
July 1, 2004
803,800
P
= 840.75 per share
50% of options exercisable
from July 1, 2006 to June 30,
2014; the remaining 50% from
July 1, 2007 to June 30, 2014
P
= 357.94
Black-Scholes
option pricing
model
March 24, 2006
749,500
P
= 854.75 per share
50% of the options become
exercisable from March 24,
2008 to March 23, 2016; the
P
= 292.12
Trinomial option
pricing model
188
remaining 50% become
exercisable from March 24,
2009 to March 23, 2016
May 17, 2007
604,000
P
= 1,270.50 per share
exercisable from May 17, 2009
to May 16, 2017, the remaining
50% become exercisable from
May 17, 2010 to May 16, 2017
P
= 375.89
Trinomial option
pricing model
August 1, 2008
635,750
P
= 1,064.00 per share
exercisable from August 1,
2010 to July 31, 2018, the
remaining 50% become
exercisable from August 1,
2011 to July 31, 2018
P
= 305.03
Trinomial option
pricing model
October 1, 2009
298,950
P
= 993.75 per share
exercisable from October 1,
2011 to September 30, 2019,
the remaining 50% become
exercisable from October 1,
2012 to
September 30, 2019
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.
A summary of the Globe Group‘s ESOP activity and related information follows:
2013
Weighted
Average
Number of
Exercise
Shares
Price
2012
Number of
Shares
Weighted
Average
Exercise
Price
2011
Weighted
Average
Number of
Exercise
Shares
Price
(In Thousand Number of Shares Except Per Share Figures )
Outstanding, at beginning
of year
Exercised
Expired/forfeited
Outstanding, at end of year
Exercisable, at end of year
1,366
(771)
(21)
574
574
P
= 1,081.01
1,085.79
729.82
P
= 1,087.76
1,087.76
1,740
(359)
(15)
1,366
1,366
P
= 1,055.03
952.28
1,145.88
P
= 1,081.01
P
= 1,081.01
1,848
(51)
(57)
1,740
1,661
P
= 1,047.80
856.65
997.06
P
= 1,055.03
P
= 1,057.94
The average share prices at dates of exercise of stock options as in 2013, 2012 and 2011 amounted to
P
= 1,586.10, P
= 1,213.00 and P
= 1,005.55, respectively.
As of December 31, 2013 and 2012, the weighted average remaining contractual life of options
outstanding is 3.85 years and 4.68 years, respectively.
189
The following assumptions were used to determine the fair value of the stock options at effective grant
dates:
Share price
Exercise price
Expected volatility
Option life
Expected dividends
Risk-free interest rate
October 1, 2009 August 1, 2008
P
= 995.00
P
= 1,130.00
P
= 993.75
P
= 1,064.00
48.49%
31.73%
10 years
10 years
6.43%
6.64%
8.08%
9.62%
May 17, 2007 March 24, 2006 July 1, 2004 April 4, 2003
P
= 1,340.00
P
= 930.00
P
= 835.00
P
= 580.00
P
= 1,270.50
P
= 854.75
P
= 840.75
P
= 547.00
38.14%
29.51%
39.50%
34.64%
10 years
10 years
10 years
10 years
4.93%
5.38%
4.31%
2.70%
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, 2013, 2012 and 2011 amounted to P
= 50.00 million, P
= 49.34 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 Plan is managed and administered by a Board of Trustees (BOT) whose members are unanimously
appointed by the Globe Group acting through its BOD. The BOT is authorized to appoint one or more
fund managers to hold, invest and reinvest the assets of the Plan and execute an Investment Agreement
with the said fund managers. The Plan is held and invested by the fund managers, in accordance with
the guidelines set by the BOT.
Under the existing regulatory framework, Republic Act 7641 requires a provision for retirement pay to
qualified private sector employees in the absence of any retirement plan in the entity, provided however
that the employee‘s retirement benefits under any collective bargaining and other agreements shall not
be less than those provided under the law. The law does not require minimum funding of the plan.
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:
2013
2012
(As restated)
2011
(As restated))
Current service cost
P
= 348,399
P
= 282,746
P
= 199,555
Actual return on plan assets
P
= 107,268
P
= 197,785
P
= 140,792
(in Thousand Pesos)
The accrued pension is as follows:
2013
2012
(As restated)
Present value of benefit obligation
Fair value of plan assets
P
= 4,262,206
(2,654,907)
P
= 3,437,028
(2,593,117)
Liabilities recognized in the consolidated statements
of financial position
P
= 1,607,299
P
= 843,911
(in Thousand Pesos)
The following tables present the changes in the present value of defined benefit obligation and fair value
of plan assets:
190
Present value of defined benefit obligation
2013
2012
(As restated)
Balance at beginning of year
Current service cost
Interest cost
Benefits paid directly by the Group
Benefits paid from plan assets
Transfers in (out)
Remeasurements in other comprehensive income:
Actuarial changes arising from changes in
assumptions
Actuarial changes arising from experience adjustment
Past service cost
P
= 3,437,028
348,399
184,708
(957)
(165,182)
–
P
= 2,722,289
282,746
165,676
–
(116,063)
(20,217)
271,077
186,916
217
313,924
88,673
–
P
= 4,262,206
P
= 3,437,028
(in Thousand Pesos)
Fair value of plan assets
2013
2012
(As restated)
Balance at beginning of year
Benefits paid
Interest income on plan assets
Contributions
Return on plan assets (excluding amount included in
net interest)
Transfers in (out)
P
= 2,593,117
(165,182)
141,597
119,392
P
= 2,376,680
(116,063)
146,962
92,441
(34,017)
–
113,314
(20,217)
P
= 2,654,907
P
= 2,593,117
(in Thousand Pesos)
The recommended contribution for the Globe Group retirement fund for the year 2014 amounted to P
=
378.73 million. This amount is based on the Globe Group‘s actuarial valuation report as of
December 31, 2013.
The fair value of plan assets by each class as of December 31, 2013 and 2012 follows:
2013
2012
(As restated)
P
= 121,330
P
= 44,573
696,382
298,750
22,801
9,033
1,506,611
183,993
1,100,846
–
62,052
1,201,653
P
= 2,654,907
P
= 2,593,117
(in Thousand Pesos)
Investments in fixed income securities:
Government
Corporate
Loans
Others
Investments in equity securities
191
The assumptions used to determine pension benefits of Globe Group are as follows:
Discount rate
2013
5.27%
2012
6.25%
Salary rate increase
5.13%
4.50%
The assumptions regarding future mortality rates are based on the 1994 Group Annuity Mortality Table
developed by the Society of Actuaries, which provides separate rate for males and females.
In 2013 and 2012, the Globe Group applied a single weighted average discount rate that reflects the
estimated timing and amount of benefit payments.
The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation as of December 31, 2013, assuming if all other
assumptions were held constant:
+0.50%
-0.50%
Impact on defined benefit
obligation Increase (decrease)
(In Thousand Pesos)
(P
= 180,415)
400,155
+1%
-1%
837,919
(348,846)
+10%
-10%
(266)
620
Increase (decrease)
Discount rates
Future salary increases
Mortality
The objective of the plan‘s portfolio is capital preservation by earning higher than regular deposit rates
over a long period given a small degree of risk on principal and interest. Asset purchases and sales are
determined by the plan‘s investment managers, who have been given discretionary authority to manage
the distribution of assets to achieve the plan‘s investment objectives. The compliance with target asset
allocations and composition of the investment portfolio is monitored by the BOT on a regular basis.
The defined benefit retirement plan is funded by the participating companies, namely Globe, Innove and
G-Xchange. The plan contributions are based on the actuarial present value of accumulated plan
benefits and fair value of plan assets are determined using an independent actuarial valuation.
The average duration of the defined benefit obligation as of December 31, 2013 is 22.21 years.
192
MATTERS AFFECTING LIQUIDITY AND CAPITAL EXPENDITURE
As regards internal and external sources of liquidity, funding will be sourced from internally generated
cash flows, and also from borrowings or available credit facilities from other local and international
commercial banks.
There is no material commitment for capital expenditures other than those performed in the ordinary
course of trade or business.
There is no significant element of income not arising from continuing operations.
There have not been any seasonal aspects that had a material effect on the financial condition or
results of Globe‘s operations.
193
INDEPENDENT AUDITORS AND COUNSEL
LEGAL MATTERS
All legal opinion/matters in connection with the issuance of the Shares which are subject of this Offer
shall be passed upon by Romulo Mabanta Buenaventura Sayoc & de Los Angeles (―Romulo‖) for the
Joint Lead Underwriters, and Globe‘s Legal Services Division for the Company. Romulo has no direct or
indirect interest in Globe. Romulo may, from time to time be engaged by Globe to advise in its
transactions and perform legal services on the same basis that Romulo provides such services to its
other clients.
INDEPENDENT AUDITORS
The financial statements of Globe Telecom, Inc. as at December 31, 2013 and 2012, and for the years
ended December 31, 2013, 2012 and 2011 appearing in this Prospectus have been audited by Sycip
Gorres and Velayo and Co. (―SGV and Co.‖), independent auditors, as set forth in their report thereon
appearing elsewhere herein.
The aggregate fees billed by SGV & Co. and other EY Firms are shown below (with comparative figures
for 2012):
(Amount in millions of Pesos)
2013
2012
Audit and Audit-Related Fees
SGV Audit Fee
P
Non-Audit Fees
EY India
SGV
Total
16.04
P
32.58
15.89
P
48.47
64.51
16.04
14.81
1.98
P
16.80
32.84
*Excludes 2013 audit fees from GTI HK of P398K (P508K in 2012) audit services performed by EY HK, GT EU of
P303K and GT UK of P457K), audit services performed by Wellden and Turnbull LLP.
Audit and Audit-Related 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 2013 and 2012. 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. The 2013 non-audit fees include charges on review of data migration, user acceptance
and integration testing related to the on-going transformation projects incurred by the Company during
its modernization period. This also 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 Auditors
services.
The Company has no disagreements with its independent auditors on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or procedure.
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 the
194
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.
GLOBE LEGAL SERVICES DIVISION
The members of Globe‘s Legal Services Division are employed by the Company and as such receive
salary and benefits including stock options, from the Company.
195
TAXATION
The following is a general description of certain Philippine tax aspects of the investment in the
Shares.
This discussion is based upon laws, regulations, rulings, income tax treaties,
administrative practices, and judicial decisions in effect at the date of this Prospectus and is subject
to any changes occurring after such date. Subsequent legislative, judicial, or administrative
changes or interpretations may be retroactive and could affect the tax consequences to the
prospective investor.
The tax treatment of a prospective investor may vary depending on such investor‟s particular
situation and certain investors may be subject to special rules not discussed below. This summary
does not purport to be a comprehensive description of all the tax considerations that may be
relevant to a decision to invest in the Shares and does not purport to deal with the tax
consequences applicable to all categories of investors, some of which (such as dealers in
securities) may be subject to special taxes.
This discussion does not provide information regarding the tax aspects of acquiring, owning,
holding, or disposing of the Shares under applicable tax laws of other applicable jurisdictions and
the specific Philippine tax consequence in light of particular situations of acquiring, owning, holding,
and disposing of the Shares in such other jurisdictions.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF
THE SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF LOCAL AND NATIONAL TAX
LAWS.
As used herein, the term ―resident alien‖ refers to an individual whose residence is within the
Philippines and who is not a citizen thereof. A ―non-resident alien‖ is an individual whose residence
is not within the Philippines and who is not a citizen thereof; a non-resident alien who is actually in
the Philippines for an aggregate period of more than 180 days during any calendar year is considered a
non-resident alien not engaged in trade or business in the Philippines. A ―domestic corporation‖ is
created or organized under the laws of the Philippines; a ―resident foreign corporation‖ is a nonPhilippine corporation engaged in trade or business in the Philippines; and a ―non-resident foreign
corporation‖ is a non-Philippine corporation not engaged in trade or business in the Philippines.
The Shares are intended to be listed with the PSE on Issue Date.
Corporate Income Tax
A domestic corporation is subject to a tax of 30% of its taxable income (gross income less allowable
deductions) from all sources within and outside the Philippines except, among other things, (a) gross
interest income from Philippine currency bank deposits and yield from deposit substitutes, trust funds,
and similar arrangements as well as royalties from sources within the Philippines which are generally
taxed at the lower final withholding tax rate of 20% of the gross amount of such income; and (b)
interest income from a depository bank under the expanded foreign currency deposit system which is
subject to a final tax at the rate of 7.5% of such income.
A minimum corporate income tax of 2% of the gross income as of the end of the taxable year is imposed
on a domestic corporation beginning on the fourth taxable year immediately following the year in which
such corporation commenced its business operations, when the minimum corporate income tax is
greater than the ordinary income tax for the taxable year.
Nevertheless, any excess of the minimum corporate income tax over the ordinary corporate income tax
shall be carried forward and credited against the latter for the three immediately succeeding taxable
years. Furthermore, subject to certain conditions, the minimum corporate income tax may be suspended
196
with respect to a corporation which suffers losses on account of a prolonged labor dispute, force
majeure, or legitimate business reverses.
In addition, under the RE Law, a corporation engaged in the exploration, development, and utilization of
RE resources and actual operation of RE systems or facilities is, after seven years of income tax holiday,
entitled to pay a corporate tax of 10% of its net taxable income (as defined in the Tax Code), provided
that the said corporation shall pass on the savings to the end-users in the form of lower power rates.
However, under current rules implementing the RE Law, it is not clear on how the corporation can pass
on the savings to end-users in order to avail of this preferential 10% tax rate.
Tax on Dividends on the Shares
Cash and property dividends actually or constructively received from a domestic corporation by
individual shareholders who are either Philippine citizens or resident aliens are subject to a final
withholding tax at the rate of 10%. Cash and property dividends actually or constructively received by
non-resident alien individuals engaged in trade or business in the Philippines are subject to a final
withholding tax on dividends derived from Philippine sources at the rate of 20% of the gross amount,
subject to applicable preferential tax rates under tax treaties in force between the Philippines and the
country of domicile of such non-resident alien individual. Non- resident alien individuals not engaged in
trade or business in the Philippines are subject to a final withholding tax on dividends derived from
Philippine sources at the rate of 25% of the gross amount, subject, however, to the applicable
preferential tax rates under tax treaties executed between the Philippines and the country of residence
or domicile of such non-resident foreign individuals. For such preferential tax treaty rates to apply, the
recipient of the dividends must not be engaged in business or professional service in the Philippines
either through a permanent establishment or a fixed base in which the dividends paid are effectively
connected.
Cash and property dividends received from a domestic corporation by another domestic corporation
or by resident foreign corporations are not subject to tax while those received by non-resident foreign
corporations are subject to withholding tax at the rate of 30%. On the other hand, cash and property
dividends received by a non- resident foreign corporation from a domestic corporation are subject to a
30% final withholding tax, which dividend tax rate may be reduced to 15% if the country in which
the non-resident foreign corporation is domiciled allows a credit against the tax due from the nonresident foreign corporation, for taxes deemed to have been paid in the Philippines equivalent to
15%, which represents the difference between the regular corporate income tax rate of 30% and the
15% tax rate on dividends. The reduced dividend tax rate may be further minimized if tax treaty relief
is available to the non-resident foreign corporation. Depending on the country of residence of the
non-resident foreign corporation, with which the Philippines has an existing tax treaty, the tax rate may
go as low as 10%.
Stock dividends distributed pro rata to any holder of the Shares are not subject to Philippine income tax.
However, the subsequent sale, exchange or disposition of the Shares received as stock dividends by
the holder is subject to either the capital gains or stock transaction tax.
Philippine tax authorities have prescribed certain procedures, through an administrative issuance, for
availment of tax treaty relief. Subject to approval by Philippine tax authorities of the Company‗s
application for tax treaty relief, the Company shall withhold taxes at a reduced rate on dividends to be
paid to a non-resident holder, if such non-resident holder provides the Company with a tax exemption
certificate, ruling, or opinion issued by the Philippine BIR confirming the tax treaty relief or preferential
rate, proof of the non-resident holder‗s legal domicile or residence in the relevant treaty state, individual
or corporate status (if applicable), and such other supporting documents as may be required by the
Company. Proof of legal domicile or residence for an individual consists of certification from his
embassy, consulate, or other equivalent certifications issued by the proper government authority, or any
other official document proving residence. Proof of residence and corporate status for a corporation
consists of authenticated copies of its articles of incorporation, other similar certifications issued by the
appropriate government authority, or other official document evidencing residence.
197
A certificate from the tax authority of the recipient‗s country is generally accepted as proof of residence
for both individuals and corporations. Aside from proof of residence, the BIR also requires the following
documents: (a) a photocopy of the articles of incorporation (or equivalent document) of the
income earner with the original copy of the consularized certification from the issuing agency that such
document is a faithful reproduction; (b) special power of attorney duly executed by the recipient in favor
of its Philippine agent to file a claim for tax treaty relief; (c) certification from the SEC that the recipient
company is not registered to engage in business in the Philippines; (d) original copy of a sworn
statement providing information on whether the issue(s) or transaction involving directly or indirectly the
same taxpayer(s) which is/are the subject of the request for ruling is/are under investigation, covered by
an on-going audit, administrative protest, claim for refund or issuance of tax credit certificate, collection
proceedings, or subject of a judicial appeal; and (e) duly notarized certificate of the corporate secretary
of the corporation showing the details of dividend declaration (with attached related board resolution),
the number and value of the subject shares of the nonresident income earner as of the date of
record/transaction and as of the date of payment of the subject dividends, percentage of ownership of
the nonresident income earner as of the date of record/transaction and as of the date of the payment of
subject dividends, acquisition date(s) of the subject shares, and the mode of acquisition of the subject
shares.
If the regular tax rate is withheld by the Company instead of the reduced rates applicable under a treaty,
the non- resident holder of the Shares may file a claim for refund from the BIR within the prescribed
period. However, because the refund process in the Philippines requires the filing of an administrative
claim and the submission of supporting information, and may also involve the filing of a judicial appeal, it
may be impractical to pursue such a refund.
SALE, EXCHANGE OR DISPOSITION OF THE SHARES
Capital Gains Tax
Net capital gains realized from the sale, exchange, or disposition of the Shares effected outside of the
facilities of the PSE by a Filipino citizen, a resident alien, a non-resident alien doing business in the
Philippines, a non-resident alien not engaged in trade or business in the Philippines, a resident foreign
corporation or a non-resident corporation other than a dealer in securities during each taxable year are
subject to final withholding tax as follows: 5% on net capital gains not exceeding P100,000 and 10% on
gains over P100,000.
Foreign individuals and corporations may avail of preferential tax rates or exemptions provided under the
applicable tax treaty. An application for tax treaty relief must be filed (and approved) by the Philippine
BIR in order to obtain such exemption under a tax treaty. A prospective investor should consult its own
tax advisor with respect to the applicable rates under the relevant tax treaty.
The transfer of the Shares shall not be recorded in the books of the Company unless the BIR certifies
that the capital gains and documentary stamp taxes relating to the sale or transfer have been paid or,
where applicable, tax treaty relief has been confirmed by the International Tax Affairs Division of the BIR
in respect of the capital gains tax or other conditions have been met.
Taxes on Transfer of Shares Listed and Traded at the PSE
A sale, barter, exchange, or other disposition of the Shares effected through the facilities of the PSE by a
resident or a non-resident individual or by a domestic or foreign corporation, other than a dealer in
securities, is subject to a stock transaction tax at the rate of 0.5% of the gross selling price or gross
value in cash of the Shares sold, bartered, exchanged, or otherwise disposed, unless an applicable
treaty exempts such sale from the said tax. Said tax shall be paid by the seller or transferor. The stock
transaction tax is classified as a percentage tax and is paid in lieu of capital gains tax. Gains on any
such sale or disposition are not subject to income tax.
198
In addition, a value added tax of 12% is imposed on the commission earned by the PSE-registered
broker who facilitated the sale, barter, exchange, or disposition through the PSE, which is generally
passed on to the client.
Documentary Stamp Tax on the Shares
The original issue of the Shares is subject to a documentary stamp tax of P1.00 for each P200.00 par
value, or a fraction thereof, of the shares of stock issued. The transfer of shares is subject to a
documentary stamp tax of P0.75 for each P200.00, or a fractional part thereof of the par value of the
shares transferred.
However, the sale, barter, or exchange of Shares listed and traded at the PSE, if made through the
6
facilities of the PSE, shall be exempt from documentary stamp tax. Otherwise, such sale or other
disposition of the Shares will be subject to a documentary stamp tax of 0.375% of the par value of the
Shares sold or disposed.
The documentary stamp tax must be paid by the transferor of the Shares. However, if such transferor
enjoys exemption from the documentary stamp tax, the transferee who is not exempt shall be directly
liable for the documentary stamp tax.
Estate and Gift Taxes
The transfer of the Shares upon the death of an individual holder to his heirs by way of succession,
whether such holder was a citizen of the Philippines or an alien and regardless of residence, is subject
to Philippine estate taxes at progressive rates ranging from 5% to 20% (if the net estate is
over P200,000). Individual and corporate holders, whether or not citizens or residents of the Philippines,
who transfer the Shares by way of gift or donation are liable to pay Philippine donor‗s tax on such
transfer at the rate of 30% of the net gifts during the year, if made to a stranger (i.e., one who is not a
brother, sister, spouse, ancestor, lineal descendant, or relative by consanguinity within the fourth degree
of relationship). Otherwise, the applicable donor‗s tax rate will range from 2% to 15% of the net gifts
during the year exceeding P100,000.00.
Estate and donors‗ taxes, however, shall not be collected in respect of intangible personal property, such
as the Shares: (a) if the deceased at the time of his death or the donor at the time of his donation was
a citizen and resident of a foreign country which at the time of his death or donation did not
impose a transfer tax of any character, in respect of intangible personal property of citizens of the
Philippines not residing in that foreign country; or (b) if the laws of the foreign country of which the
deceased or donor was a citizen and resident at the time of his death or donation allows a similar
exemption from transfer or death taxes of every character or description in respect of intangible personal
property owned by citizens of the Philippines not residing in that foreign country.
TAXATION OUTSIDE THE PHILIPPINES
The Shares are considered under Philippine law as situated in the Philippines and the gain derived from
their sale is entirely from Philippine sources; hence such gain is subject to Philippine capital gains
tax and the transfer of such shares by gift (donation) or succession is subject to the donor‗s or estate
taxes, each as described above. Sales or other dispositions of the Shares through the facilities of the
PSE by a resident or a non-resident holder, other than a dealer in securities, are, however, subject
to a stock transaction tax at the rate of 0.5% of the gross selling price or gross value in money of
the shares of stock sold or otherwise disposed, unless an applicable treaty exempts such sale from said
tax.
6
The exemption from documentary stamp tax of the sale, barter or exchange of shares of stock listed and traded through the local
stock exchange was previously for a period of five (5) years from the effectivity of Republic Act No. 9243 dated February 17, 2004,
or until March 20, 2009. However, on June 30, 2009, then President Gloria Macapagal-Arroyo signed Republic Act No. 9648,
which permanently exempts the sale, barter or exchange of shares of stock listed and traded through the local stock exchange
from the documentary stamp tax and was made retroactive to March 20, 2009.
199
The tax treatment of a non-resident holder of the Shares in jurisdictions outside the Philippines may
vary depending on the tax laws applicable to such holder by reason of domicile or business activities
and such holder‗s particular situation. This Prospectus does not discuss the tax consideration on nonresident holders of the Shares under laws other than those of the Philippines.
200
THE PHILIPPINE STOCK MARKET
The information presented in this section has been extracted from publicly available document which
have not been prepared or independently verified by the Company, the Underwriters or any of their
respective subsidiaries, affiliates or advisors in connection with re-issuance of the Subject Shares.
BRIEF HISTORY
The Philippines initially had two stock exchanges, the Manila Stock Exchange, which was organized in
1927, and the Makati Stock Exchange, which began operations in 1963. Each exchange was selfregulating, governed by its respective Board of Governors elected annually by its members.
Several steps initiated by the Government have resulted in the unification of the two bourses into the
PSE. The PSE was incorporated in 1992 by officers of both the Makati and the Manila Stock Exchanges.
In March 1994, the licenses of the two exchanges were revoked. While the PSE maintains two trading
floors, one in Makati City and the other in Pasig City, these floors are linked by an automated trading
system, which integrates all bids, and ask quotations from the bourses.
In June 1998, the Philippine SEC granted the ―Self-Regulatory Organization‖ status to the PSE,
allowing it to impose rules as well as implement penalties on erring trading participants and listed
companies. On August 8, 2001, the PSE completed its demutualization, converting from a non-stock
member- governed institution into a stock corporation in compliance with the requirements of the
Philippine Securities Regulation Code. The PSE has an authorized capital stock of 97.8 million
shares, of which, of which 30.7 million shares are subscribed and fully paid up. Each of the 184
member-brokers was granted 50,000 common shares of the new PSE at a par value of P1.00 per
share. In addition, a trading right evidenced by a ―Trading Participant Certificate‖ was immediately
conferred on each member broker allowing the use of the PSE‘s trading facilities. As a result of the
demutualization, the composition of the PSE Board of Governors was changed, requiring the inclusion
of seven brokers and eight non-brokers, one of whom is the President.
On December 15, 2003, the PSE listed its shares by way of introduction at its own bourse as part of a
series of reforms aimed at strengthening the Philippine securities industry.
Classified into financial, industrial, holding firms, property, services, and mining and oil sectors,
companies are listed either on the PSE‗s Main Board or the Small, Medium and Emerging Board.
Previously, the PSE allowed listing on the First Board, Second Board or the Small, Medium and
Enterprises Board. As a result of the issuance by the PSE of Memorandum No. CN-No. 2013-0023
dated June 6, 2013, revisions to the PSE Listing Rules were made. Among such changes are the
removal of the Second Board listing and the requirement that lock-up rules be embodied in the articles
of the incorporation of the issuer. Each index represents the numerical average of the prices of
component shares. The PSE has an index, referred to as the PHISIX, which as at the date thereof
reflects the price movements of selected shares listed on the PSE, based on traded prices of shares
from the various sectors. The PSE shifted from full market capitalization to free float market
capitalization effective April 3, 2006, simultaneous with the migration to the free float index and the
renaming of the PHISIX to PSEi. The PSEi is composed of shares of 30 selected companies listed on
the PSE.
With the increasing calls for good corporate governance, the PSE has adopted an online daily
disclosure system to improve the transparency of listed companies and to protect the investing public.
The table below sets out movements in the composite index as of the last business day of each
calendar year from 1995 to 2013, and the most recent month end in 2014, and shows the number of
listed companies, market capitalization, and value of shares traded for the same period:
201
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
May 30, 2014
Source: PSE
Composite
Index at
Closing
2,594.2
3,170.6
1,869.2
1,968.8
2,142.9
1,494.5
1,168.1
1,018.4
1,442.4
1,822.8
2,096.0
2,982.5
3,621.6
1,872.9
3,052.7
4,201.1
4,372.0
5,812.7
5,889.8
6,647.7
Number of
Aggregate Market Combined Value
Listed
Capitalization
of Turnover
Companies
(in P billions)
(in P billions)
205
1,545.7
379.0
216
2,121.1
668.8
221
1,251.3
586.2
222
1,373.7
408.7
225
1,936.5
781.0
229
2,576.5
357.7
231
2,141.4
159.6
234
2,083.2
159.7
236
2,973.8
145.4
235
4,766.3
206.6
237
5,948.4
383.5
239
7,173.2,
572.6
244
7,977.6
1,338.3
246
4,069.2
763.9
248
6,029.1
994.2
253
8,866.1
1,207.4
253
8,697.0
1,422.6
268
10,850.0
1,420.0
257
11,931.3
2,456.2
264
13,093.2
799.6
TRADING
The PSE is a double auction market. Buyers and sellers are each represented by stockbrokers. To
trade, bid or ask prices are posted on the PSE‘s electronic trading system. A buy (or sell) order that
matches the lowest asked (or highest bid) price is automatically executed. Buy and sell orders received
by one broker at the same price are crossed at the PSE at the indicated price. Transactions are
generally invoiced through a confirmation slip sent to customers on the trade date (or the following trading
day). Payment of purchases of listed securities must be made by the buyer on or before the third
trading day (the settlement date) after the trade.
Wholesale trading on the PSE starts at 9:30 a.m. and ends at 3:30 p.m., with trading recess from
12:00 nn to 1:30 p.m. There is also a provision for ten-minute extensions during which transactions
may be conducted, provided that they are executed at the last traded price and are only for the
purpose of completing unfinished orders. The PSE may effect changes to the hours and schedule of a
trading day, as the circumstance warrants. Trading days are Monday to Friday, except legal and special
holidays, days when the BSP is closed for various reasons, and such other days as may otherwise be
declared by the SEC or the PSE, through its President or other duly authorized representative, to be a
non-trading day.
Minimum trading lots range from five (5) to 1,000,000 shares depending on the price range and
nature of the security traded. Odd-sized lots are traded by brokers on a board specifically designed for
odd lot trading.
To maintain stability in the stock market, daily price swings are monitored and regulated. Under
current PSE regulations, when the price of a listed security moves up by 50.00% or down by 50.00% in
one day (based on the previous closing price or last posted bid price, whichever is higher), the price of
that security is automatically frozen by the PSE, unless there is an official statement from the
company or a government agency justifying such price fluctuation, in which case the affected security
can still be traded but only at the frozen price. If the issuer fails to submit such explanation, a trading
202
halt is imposed by the PSE on the listed security the following day. Resumption of trading shall be
allowed only when the disclosure of the company is disseminated, subject again to the trading ban.
NON-RESIDENT TRANSACTIONS
When the purchase/sale of Philippine shares of stock involves a non-resident, whether the transaction is
effected in the domestic or foreign market, it shall be the responsibility of the securities
dealer/broker to register the transaction with the BSP. The local securities dealer/broker shall file with
the BSP, within three business days from the transaction date, an application in the prescribed
registration form. After compliance with other required undertakings, the BSP shall issue a Certificate of
Registration. Under BSP rules, all registered foreign investments in Philippine securities including
profits and dividends, net of taxes and charges, may be repatriated.
SCRIPLESS TRADING
In 1995, the PDTC (formerly the Philippine Central Depository, Inc.), was organized to establish a
central depository in the Philippines and introduce scripless or book-entry trading in the Philippines. On
December 16, 1996, the PDTC was granted a provisional license by the Philippine SEC to act as a
central securities depository.
All listed securities at the PSE have been converted into book-entry settlement in the PDTC. The
depository service of the PDTC provides the infrastructure for lodgment (deposit) and upliftment
(withdrawal) of securities, pledge of securities, securities lending and borrowing and corporate
actions including shareholders‘ meetings, dividend declarations and rights offerings. The PDTC also
provides depository and settlement services for non-PSE trades of listed equity securities. For
transactions on the PSE, the security element of the trade will be settled through the book-entry
system, while the cash element will be settled through the current settlement banks.
In order to benefit from the book-entry system, securities must be immobilized into the PDTC system
through a process called lodgment. Lodgment is the process by which shareholders transfer legal title
(but not beneficial title) over their shares of stock in favor of the PCD Nominee Corporation (―PCD
Nominee‖), a corporation wholly-owned by the PDTC, whose sole purpose is to act as nominee and
legal title holder of all shares of stock lodged in the PDTC. ―Immobilization‖ is the process by which the
warrant or share certificates of lodging holders are canceled by the transfer agent and the
corresponding transfer of beneficial ownership of the immobilized shares in the account of the PCD
Nominee through the PDTC participant will be recorded in the issuing corporation‘s registry. This
trust arrangement between the participants and PDTC through the PCD Nominee is established by and
explained in the PDTC Rules and Operating Procedures approved by the Philippine SEC. No
consideration is paid for the transfer of legal title to the PCD Nominee. Once lodged, transfers of
beneficial title of the securities are accomplished via book-entry settlement.
Under the current PDTC system, only participants (e.g. brokers and custodians) will be recognized by
the PDTC as the beneficial owners of the lodged equity securities. Thus, each beneficial owner of
shares, through his participant, will be the beneficial owner to the extent of the number of shares held by
such participant in the records of the PCD Nominee. All lodgments, trades and uplifts on these
shares will have to be coursed through a participant. Ownership and transfers of beneficial interests in
the shares will be reflected, with respect to the participant‘s aggregate holdings, in the PDTC system,
and with respect to each beneficial owner‘s holdings, in the records of the participants. Beneficial
owners are thus advised that in order to exercise their rights as beneficial owners of the lodged
shares, they must rely on their participant-brokers and/or participant custodians.
Any beneficial owner of shares who wishes to trade his interests in the shares must course the trade
through a participant. The participant can execute PSE trades and non-PSE trades of lodged equity
securities through the PDTC system. All matched transactions in the PSE trading system will be fed
through the SCCP, and into the PDTC system. Once it is determined on the settlement date (T+3) that
there are adequate securities in the securities settlement account of the participant-seller and
203
adequate cleared funds in the settlement bank account of the participant-buyer, the PSE trades are
automatically settled in the SCCP Central Clearing and Central Settlement system, in accordance with
the SCCP and PDTC Rules and Operating Procedures. Once settled, the beneficial ownership of
the securities is transferred from the participant-seller to the participant-buyer without the physical
transfer of stock certificates covering the traded securities.
If a shareholder wishes to withdraw his stockholdings from the PDTC system, the PDTC has a
procedure of upliftment under which PCD Nominee will transfer back to the shareholder the legal title to
the shares lodged.
The uplifting shareholder shall follow the Rules and Operating Procedures of the PDTC for the upliftment
of the shares lodged under the name of the PCD Nominee. The transfer agent shall prepare and send
a Registry Confirmation Advice to the PDTC covering the new number of shares lodged under the
PCD Nominee. The expenses for upliftment are for the account of the uplifting shareholder.
The difference between the depository and the registry would be on the recording of ownership of the
shares in the issuing corporations‘ books. In the depository set-up, shares are simply immobilized,
wherein customers‘ certificates are canceled and a confirmation advice is issued in the name of PCD
Nominee to confirm new balances of the shares lodged with the PDTC. Transfers among/between
broker and/or custodian accounts, as the case may be, will only be made within the book-entry system of
the PDTC. However, as far as the issuing corporation is concerned, the underlying certificates are in the
PCD Nominee‘s name. In the registry set-up, settlement and recording of ownership of traded
securities will already be directly made in the corresponding issuing company‘s transfer agents‘ books or
system. Likewise, recording will already be at the beneficiary level (whether it be a client or a
registered custodian holding securities for its clients), thereby removing from the broker its current ―de
facto‖ custodianship role.
The option if whether a listed security should be ―housed‖ in the depository or registry is at the issuer‗s
discretion. The migration from the depository to the registry model aims to eliminate the legal and
operational risk brought about by a depository infrastructure. Likewise, the migration is expected to
strengthen measures to protect public investors/shareholders and decrease transaction costs
resulting from additional layers in the settlement process. At present, the depository model is the
most widely used and recognized system, being utilized by nearly all jurisdictions around the world.
In light of the CCCS, custodians holding Philippine listed equity securities now have the following
options:
a. Stay with the depositary for all its securities, whereby the PDTC acts as their implied
―Custodian‖. For shares under the PDTC, custodians are direct PDTC account holders with the
shares still recorded in the PCD Nominee‗s name as far as the corporation/transfer agent is
concerned. For shares under the registry, the custodian appears to be a ―client‖ under ―PCD‖,
such that shares are recognized or recorded with PCD as the master/controlling account; or
b. Be a system participant of the SCCP wherein the CCCS would offer to the custodians the
interface to both the depositary and registry systems. In this option, for shares under the PDTC,
custodians will still have the option to maintain their own accounts in the PDTC or have an
omnibus account together with the broker accounts in the PDTC as shares are accounted for or
segregated per accountholder in the CCCS. This simplifies the custodian‗s interface into a single
connectivity for both the depositary and the registry systems. For shares under the registry
system, the custodian will have its own master account, having control over its own account. In
the registry scenario, the custodian is already recognized as the beneficial holder of the
securities on behalf of its clients. The custodian effectively is given a direct relationship with the
issuing company wherein it receives the annual reports, dividends, the other communications
and information directly. Prospectively, when the custodian is accredited as an indirect clearing
member of the SCCP, straight-through processing of trades or settlement can already be done
directly with the custodian or with its client.
204
AMENDED RULE ON LODGEMENT
On June 24, 2009, the PSE apprised all listed companies and market participants through
Memorandum No. 2009-0320 that, beginning July 1, 2009, as a condition for the listing and trading of the
securities of an applicant company, the applicant company shall electronically lodge its registered
securities with the PDTC or any other entity duly authorized by the SEC, without any jumbo or mother
certificate in compliance with the requirements of Section 43 of the Securities Regulation Code. In
compliance with the foregoing requirement, actual listing and trading of securities on the scheduled
listing date shall take effect only after submission by the applicant company of the documentary
requirements stated in Article III Part A of the Revised Listing Rules.
Further, the PSE apprised all listed companies and market participants on May 21, 2010, through
Memorandum No. 2010-0246, that the Amended Rule on Lodgment of Securities under Section 16 of
Article III, Part A of the Revised Listing Rules of the Exchange shall apply to all securities that are
lodged with the PDTC or any other entity duly authorized by the SEC.
For listing applications, the amended rule on lodgment of securities is applicable to:
a. The offer shares/securities of the applicant company in the case of an initial public offering;
b. The shares/securities that are lodged with the PDTC, or any other entity duly authorized by the
Commission in the case of a listing by way of introduction;
c.
New securities to be offered and applied for listing by an existing listed company; and
d. Additional listing of securities of an existing listed company.
Pursuant to the said amendment, the PDTC issued an implementing procedure in support thereof to wit:
For new companies to be listed at the PSE as of July 1, 2009 the usual procedure will be observed
but the Transfer Agent on the companies shall no longer issue a certificate to PCD Nominee Corp
but shall issue a Registry Confirmation Advice, which shall be the basis for the PDTC to credit the
holdings of the Depository Participants on listing date.
On the other hand, for existing listed companies, the PDTC shall wait for the advice of the Transfer
Agents that it is ready to accept surrender of PCNC jumbo certificates and upon such advice the PDTC
shall surrender all PCNC jumbo certificates to the Transfer Agents for cancellation. The Transfer Agents
shall issue a Registry Confirmation Advice to PCNC evidencing the total number of shares registered in
the name of PCNC in the Issuer‗s registry as of confirmation date.
SETTLEMENT
The Securities Clearing Corporation of the Philippines (―SCCP‖) is a wholly owned subsidiary of the
PSE, and was organized primarily as a clearance and settlement agency for SCCP-eligible trades
executed through the facilities of the PSE. SCCP received its permanent license to operate on January
17, 2002. It is responsible for:



Synchronizing the settlement of funds and the transfer of securities through Delivery versus
Payment clearing and settlement of transactions of Clearing Members, who are also Trading
Participants of the PSE;
Guaranteeing the settlement of trades in the event of a Trading Participant‘s default through the
implementation of its Fails Management System and administration of the Clearing and trade
Guaranty Fund; and
Performance of Risk Management and Monitoring to ensure final and irrevocable settlement.
205
SCCP settles PSE trades on a 3-day rolling settlement environment, which means that settlement of
trades takes place three (3) Business Days after transaction date (T+3). The deadline for settlement of
trades is 12:00 noon of T+3. Securities sold should be in scripless form and lodged under the PDTCs
book entry system. Each Trading Participant maintains a Cash Settlement Account with one of the four
existing Settlement Banks of SCCP which are BDO Unibank, Inc., Rizal Commercial Banking
Corporation, Metropolitan Bank & Trust Company and Deutsche Bank AG (Manila Branch). Payment
for securities bought should be in good, cleared funds and should be final and irrevocable. Settlement is
presently on a broker level.
SCCP implemented the CCCS last May 29, 2006. CCCS employs multilateral netting whereby the
system automatically offsets ―buy‖ and ―sell‖ transactions on a per issue and a per flag basis to arrive at
a net receipt or a net delivery security position for each Clearing Member. All cash debits and
credits are also netted into a single net cash position for each Clearing Member. Notation of the original
PSE trade contracts occurs, and SCCP stands between the original trading parties and becomes the
Central Counterparty to each PSE-Eligible trade cleared through it.
ISSUANCE OF CERTIFICATED SHARES
On or after the listing or re-issuance of the shares on the PSE, any beneficial owner of the shares
may apply to the PDTC through his broker or custodian-participant for a withdrawal from the bookentry system and return to the conventional paper-based settlement. If a stockholder wishes to
withdraw his stockholdings from the PDTC System, the PDTC has a procedure of upliftment under
which PCD Nominee will transfer back to the stockholder the legal title to the shares lodged. The
uplifting shareholder shall follow the Rules and Operating Procedures of the PDTC for the upliftment
of shares lodged under the name of PCD Nominee. The transfer agent shall prepare and send a
Registry Confirmation Advice to the PDTC covering the new number of shares lodged under PCD
Nominee. The expenses for upliftment are for the account of the uplifting shareholder.
Upon the issuance of certificated shares in the name of the person applying for upliftment, such shares
shall be deemed to be withdrawn from the PDTC book-entry settlement system. Such shares cannot be
traded on the PSE without lodging them once again in the depository, in accordance with existing PSE
and PDTC rules that were approved by the SEC. Pending completion of the upliftment process, the
beneficial interest in the shares covered by the application for upliftment is frozen and no trading and
book-entry settlement will be permitted until certificated shares shall have been issued by the relevant
company‗s transfer agent.
206
Transaction Parties
The Issuer
Name
Globe Telecom, Inc.
The Globe Tower, 32
Global City, Taguig.
nd
Address
th
Street corner 7 Avenue, Bonifacio
The Underwriters
Name
BPI Capital Corporation
BDO Capital & Investment
Corporation
SB Capital Investment Corporation
Address
8/F, BPI Building, 6768 Ayala Avenue,
Makati City 1226, Philippines
20/F, South Tower, BDO Corporate Center, 7899 Makati
Avenue, Makati City.
6776 Ayala Avenue, Makati City
Legal Counsel
Name
Romulo Mabanta Buenaventura
Sayoc & de los Angeles
Address
21st Floor Philamlife Tower, 8767 Paseo de Roxas, Makati
City, 1226 Philippines
The Transfer Agent
Name
Philippine Depository and Trust
Corp.
Address
37th Floor, Tower 1, The Enterprise Center, 6766 Ayala
Avenue, Makati City
Receiving and Paying Agent
Name
BPI Stock Transfer Office
Address
BPI Building, 6768 Ayala Avenue corner Paseo De Roxas,
Makati City 1226
207
APPENDIX
208
FINANCIAL INFORMATION
209

Issue Manager Joint Lead Underwriters The date of

Transcription

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