MESSAGE FROM THE CHAIRMAN

I am happy to report Globe Telecom’s record results for 2016, setting new marks in service revenues, EBITDA, and core net income. Despite the heightened industry competition, the company delivered double-digit growth across all data-related services, helped in part by the consolidation of Bayan for the full year. By focusing on customer experience and the enrichment of the Filipino digital lifestyle, Globe gained recognition as the number one mobile company in the Philippines.

 

Beyond business success, we are similarly embarking on a transformation journey to become a truly purpose-led organization that casts a positive and sustainable impact to society. We believe that to become successful, we need to start the engagement among our employees. Every Ka-Globe is able to channel his or her personal purpose and align it with the company’s own to serve customers more meaningfully, creating a “Globe of Good.”

 

This year, Globe received a score of 91% in the Sustainable Engagement Index (SEI), 6 points higher than the global telecommunications norm and 5 points higher than the global high-performing norm. Once again, we gained recognition on being the first telecommunications company included in the 2016 Global High Performance Companies Norm, comprised of organizations with exemplary financial performance and human resource practices. We believe these recognitions validate our efforts in developing a culture of empowerment, collaboration, and innovation at Globe.

 

2016 PHILIPPINE ECONOMIC PERFORMANCE

 

In 2016, the Philippine economy enjoyed its highest growth in three years, with gross domestic product (GDP) up by 6.8%, ranking among the highest in Asia. Growth continued to be broad-based, driven by the increase in both domestic and external demand. Domestic demand growth was fueled by increases in consumer spending, government consumption, and gross fixed capital formation, while external demand grew from an increase in both exports and imports of goods and services.

 

With the new government’s thrust to increase fiscal investment and infrastructure spending, and to undertake a comprehensive tax reform program, the economy is in a strong position to maintain its current growth trajectory and promote more inclusive growth. This is in spite of the potential external headwinds that may affect the inflow of remittances from overseas Filipinos and the growth of the Business Process Outsourcing (BPO) sector, which, together with a robust tourism sector, have driven the growth in private consumption in the last few years.

 

2016 INDUSTRY GROWTH AND COMPETITIVE DYNAMICS

 

The telecommunications sector barely grew in 2016 due to the re-rating of mobile revenues, which accounts for 65% of total operating revenues, with the continued shift in traffic from legacy voice and SMS to data, and the heightened industry competition. However, Globe once again outperformed the sector, growing by 5% as we delivered a better customer experience and provided a wide variety of choice content through our partnerships with the best of breed internet and content companies.

 

Mobile penetration rose to an estimated 120% by the end of the year, with nearly 126 million industry subscribers. The incidence of multi-SIMming remained high due to the enticing industry data offers and the increased availability and affordability of tablet and portable WiFi devices.

 

Going forward, we welcome rational competition to unlock more value from the industry, as this allows the sector to properly monetize growing data traffic, driven by increasing smartphone penetration and the Filipino penchant for social networking and online content. Furthermore, home broadband and corporate data segments represent exciting opportunities as more households and enterprises require broadband and data connectivity.

 

OUR VISION OF FIRST WORLD INTERNET CONNECTIVITY IN THE PHILIPPINES

 

In line with our vision for the Philippines to have an Internet connectivity that is at par with developed markets, the company is fast-tracking the deployment of LTE services using the 700 megahertz (MHz) and 2600 MHz frequencies obtained from the San Miguel deal. We continue to invest heavily on network infrastructure and deployment of fiber optic cables to bring about a better internet experience in the country. As Information and Communications Technology (ICT) development has a direct impact to the country’s GDP growth, Globe has steadily increased its portfolio of business solutions to both large multinational companies and the small and medium enterprises. Combining our homegrown knowledge of the Philippine market with the latest innovations, Globe is able to provide the right technology, infrastructure, and know-how, customized to the needs of our enterprise partners from a wide range of industries. With this, we are also creating opportunities for growth and progress for the emerging and medium-sized businesses.

 

COMMITMENT TO CREATING SHAREHOLDER VALUE

 

Consistent with our commitment to creating shareholder value, Globe paid out a total of P11.7 billion in common share dividends in 2016, which was 6.0% higher than 2015. This represents approximately 77% of 2015 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. This translated to a 4.8% dividend yield, which remained competitive versus the yields of government securities and other Philippine listed companies.

 

More than financial gains, we exerted great effort to create our lasting contribution to society. We worked with key partners Singtel and Optus to bring the Digital Thumbprint Program in the Philippines to educate our youth on responsible digital citizenship. This goes hand in hand with our responsibility as the purveyor of the Filipino digital lifestyle and the service provider of mobile and fixed internet. Together with the Department of Education, we institutionalized the Global Filipino Schools (GFS) program in 80 public schools nationwide. Through this program, teachers and students developed 21st century skills such as creativity, critical thinking, collaboration, and communication. Mobile applications such as the Mind Museum App and the GFS e-library were incorporated into the program.

 

We also collaborated with one of our content partners, Astro in Malaysia, to participate in their Astro Kem Bola overseas training program benefitting 49 grassroots football communities comprising 590 participants. Five children with ages 10-12 years old were given the privilege of sports training by FCB Escola in Barcelona. These programs respond to the United Nations Sustainable Development Goal 4 (UN SDG 4), which calls for quality education.

 

In closing, I thank our Board of Directors, the management team, and employees for their untiring commitment and dedication in serving our customers. Our board members remained engaged across a variety of governance committees throughout the year, and our employee and executive teams worked determinedly to elevate the way we innovate to continuously improve customer experience. I also thank our business partners for their support, our customers for their loyal patronage, and our fellow shareholders for their trust and confidence in our ability to build and create stakeholder value in the years ahead.

 

On behalf of the Board of Directors, I take this opportunity to welcome Mr. Arthur Lang who will take over from Mr. Mark Chong as one of Singtel’s representatives on the Board. I am certain Mr. Lang’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. Chong as a member of the Board for a combined five years, including two years as the Co-Vice Chairman and three years as Vice Chairman of the Executive Committee, and member of the Compensation and Nomination Committees. I wish him continued success as the Group Chief Technology Officer of Singtel.

 

 

Jaime Augusto Zobel de Ayala

Chairman