Message from the Chairman

I am pleased to report that 2015 proved to be another record year for Globe Telecom as it lived up to its mission of creating a connected world with its strongest year ever. The company surpassed its previous year's record performance, posting new highs in service revenues, EBITDA, and earnings. In the face of intense industry competition, the company once again registered broad-based data-driven growth across its key services and was also helped, in part, by the consolidation of Bayan in the second half of the year. By focusing on improving the customer experience and by riding with the shift toward greater data consumption across all segments, Globe has solidified its leadership in the digital space, proving to be the data provider of choice for Filipinos' digital lifestyles.

 

2015 Philippine Economic Performance
Our impressive results were buoyed by the robust Philippine economy. The Philippines gross domestic product (GDP) grew by 5.8% in 2015, which remained one of the highest among Asian economies. This result also gave the country a six-year average real GDP growth of 6.2%, the highest since the late seventies. Fourth quarter GDP expanded at the fastest pace for the year at 6.3% year-on-year, with private consumption and investment growing at sustained high rates and government construction accelerating.

 

Moreover, the country's solid economic performance was once again sustained by consumer spending, on the back of US$25.8 billion of remittances from overseas Filipinos, or 6.2% higher than 2014, and the continued growth of the business process outsourcing (BPO) sector, which generated US$21.3 billion in 2015, up 16% from 2014, and the tourism sector, which enjoyed a record 5.4 million visitors, surpassing the five million mark for the first time and generating an estimated five billion dollars of international visitor receipts, not to mention more employment and livelihood opportunities for Filipinos1. These various indicators bode well for the telecommunications sector, in both the consumer and enterprise segments of our business.

 

2015 Industry Growth and Competitive Dynamics
Similar to last year, growth in the telecommunications sector lagged relative to GDP growth with 3.9% in 2015, as the mobile segment, which accounts for 62% of overall industry revenues, continued to re-balance given the shift in traffic from the core voice and SMS services to data. However, industry prospects remain bright with the focus on the monetization of the growing data traffic, the increasing smartphone penetration and the Filipino fondness for social networking and data services. Also, the @Home broadband segment represents a key growth driver going forward as more households require broadband connectivity for education, social media and entertainment-related content.

 

As the battleground shifts into data services, competition in the telecommunications sector remained intense as the incumbent aimed to protect its declining overall revenue and subscriber market shares. Mobile penetration rose to an estimated 115% by the end of the year, with nearly 118 million industry subscribers. The incidence of multi-SIMming remained high, as customers kept extra SIMs handy due to the high interconnect costs of voice and SMS, enticing data offers from both the incumbent and Globe, and the increased availability and affordability of tablet and portable WiFi devices.

 

Continued Commitment to Shareholder Value
Globe remains fully committed to creating shareholder value, paying out a total of P11.6 billion in dividends in 2015, which was 11% higher than 2014. This represents approximately 76% of 2014 core net income and is in line with the company's policy of distributing dividends equivalent to 75% to 90% of prior year's core net income. Also, this translated to a 4.7% dividend yield, which remained competitive versus the yields of government securities and other Philippine listed companies. Coupled with the increase in share price for the year of 5.8%2, total shareholder return in 2015 was 10.5%.

 

Setting the Pace for Best Practices in the Telecom Sector toward a Sustainable Future
With the Philippines already feeling the effects of climate change, such as the devastation to life and property caused by typhoons Ondoy and Hayan, among others, the company recognizes the importance of institutionalizing sustainability practices as part of its business strategy and operations. As a socially responsible business, Globe has introduced innovations that are sustainable and which help reduce its carbon footprint. Guided by the 17 Sustainable Development Goals of the United Nations, the company initially identified four areas to focus on, namely: Care for the Environment; Care for our People; Positive Societal Impact; and, Enabling a Digital Nation.

 

Because of the company's large business footprint, Globe recognizes its responsibility to mitigate the effects of climate change. Investing in a low carbon future builds on the foundation of the company's social license to operate. Examples of Globe Telecom's initiatives for its cell sites include the use of solar energy as back-up energy and the use of deep cycle fuel cell batteries with lower emissions, which help reduce carbon dioxide emissions. Also, over the last five years, Globe has remained committed to planting indigenous trees and preserving mangroves covering over 15,000 hectares that offset more than 700,000 kilograms of greenhouse gases. Globe Telecom's Project 1Phone addresses proper e-waste disposal by collecting old phones from customers for proper e-waste recovery and recycling. Lastly, the Globe Tower head office is a testament to the company's commitment to sustainability. As a Silver LEED-certified building, the office design harnesses natural sunlight for efficient lighting, has an efficient gray water collection system, and is working towards a paperless office set-up through several Google Apps for Work solutions.

 

In closing, I thank our Board of Directors, the management team, and employees for their tireless efforts and contributions this past year. Our board members remained engaged across a variety of governance committees throughout the year and our employee and executive teams work tirelessly to improve on our standards to innovate and to continuously improve customer experience. I also thank our business partners for their support, our subscribers for their loyal patronage, and our fellow shareholders for their trust and confidence in Globe and our ability to continue to build and create value in the years ahead.

 

On behalf of the other board members of Globe, I also take this opportunity to welcome Mr. Teodoro Limcaoco who will take over from Mr. Gerardo Ablaza as one of Ayala's representatives on the board. I am certain Mr. Limcaoco's expertise and experience will contribute significantly to the governance and management of our company. I would also like to acknowledge the significant contributions of Mr. Ablaza who, during his important tenure as CEO of Globe Telecom, built it into one of the region's most dynamic telecom companies. We thank him for his 19 years of contribution to the company across managerial and governance responsibilities. I wish him continued success as the CEO of Manila Water and as part of Ayala's senior management team. Thank you.

 


Jaime Augusto Zobel de Ayala
Chairman


1Source: Official Gazette of the Philippine Government, based on the article "Uninterrupted, robust tourism growth since 2010" dated March 3, 2016.
2Based on Globe closing share price of P1,852 (12/29/15)