MESSAGE FROM THE PRESIDENT AND CEO

Our story in 2016 is an exciting mix of many “firsts” and going full steam ahead with our network expansion amidst the growing public clamor for improved services in the sector.

 

For many years, we have focused on strengthening our portfolio of offerings and drive to enhance customer experience to be the preferred mobile company across all market segments. This year, we achieved a milestone in successfully capturing overall revenue market share, making us the #1 mobile company in the country, our first after many years of being a challenger brand in an intensely competitive industry.

 

Leadership, however, can only be sustainable if we play to win the infinite game. So we set our sights towards our unique purpose as a business—In everything we do, we treat people right to do a Globe of Good.

 

For the first time in our company’s history, Globe embarked on a purpose-led transformation that will be our anchor to win our future. Our new purpose enabled us to define our vision of seeing a Philippines where families’ dreams come true, businesses flourish, and the nation is admired, as well as our mission of creating wonderful experiences for people to have choices, overcome challenges, and discover new ways to enjoy life.

 

With changing lifestyles and the continuing digital shift, internet services have become even more pervasive. In June, the United Nations (UN) Human Rights Council declared internet access as a basic human right, which cemented the global need for connectedness. Expectedly, the public clamor for better, more affordable and accessible internet services grew louder, resonating in the halls of lawmakers and opinion leaders alike.

 

Globe is at the forefront of the industry in advocating reforms by bringing out key challenges and solutions to build the much-needed infrastructure the country needs so that all Filipinos may enjoy pervasive connectivity. Central to these are the permitting and right of way issues that hampered network roll-outs and builds over many years, severely impacting the coverage, speed, and reliability of mobile services. We also engaged various stakeholders in educating the public about difficulties in deploying fiber to homes and businesses, and the necessary capital investments needed to keep up with technology shifts as we ride on the digital bandwagon.

 

In all these, the timely acquisition of the stranded telco assets of San Miguel Corporation allowed us to increase capacity and improve network experience by immediately using the valuable 700 MHz and other LTE spectrum, such that for the first time, we were able to blanket the entire National Capital Region and key regional cities with 4G/LTE experience.

 

With customers having a better network experience, a purpose-led organization, dedicated, and passionate corps of talents, Globe once again registered substantial business gains, breaking past records anew and solidly building a future where data overshadows voice and SMS services. Let me share the highlights of this transformational year.

 

FINANCIAL AND OPERATIONAL PERFORMANCE

 

Our consolidated service revenues hit a new record high of P120.0 billion, a solid 6% from the previous year’s record of P113.7 billion. On the back of these revenues, our EBITDA also reached a record P50.0 billion in 2016, up 9% year-on-year. Net income, however, dipped 4% to P15.9 billion, which includes expenses from our P70-billion acquisition of the stranded telecommunications business of Vega Telecom owned by San Miguel Corporation in May 2016.

 

We continue to attribute our strong revenue performance to broad-based growth across all businesses, particularly as the uptake in data-related services continued to offset the decline in traditional voice and SMS revenues. Total data-related revenues accounted for 49% of consolidated services in 2016 from 42%, previously.

 

Mobile revenues grew 1% to P91.9 billion from the P91.2 billion recorded a year ago as we continued to gain market share as the No. 1 mobile company in the country. As of end-2016, our mobile subscriber base has grown to 62.8 million, up 12% year-on-year. Once again, we have managed to dominate the postpaid segment with revenues of P34.3 billion, up 1% year-on-year from P34.0 billion in 2015.

 

This segment accounted for 37% of our mobile revenues and has led to gains in the prepaid segment as well. Prepaid revenues grew to P57.6 billion, a 1% increase due to a 13% growth in our prepaid subscriber base, which now numbers 60.3 million.

 

This year, we achieved another milestone as smartphone penetration in our network reached 61% by the fourth quarter of 2016, breaking past the critical 50% mark. As a result, total wireless data traffic surged by 44% year-on-year. We see this trend persisting as mobile users continue to transition from traditional voice and legacy SMS and towards more VoIP-type of communication or messaging platforms such as Viber, WhatsApp, and Facebook Messenger, and enjoy more streaming video and music.

 

In step with the surging demand for internet and data connectivity, our home broadband service revenues reached P14.5 billion or 28% higher than P11.3 billion in 2015. Meanwhile, corporate data services hit P9.9 billion, a 28% growth year-on-year, driven by rising demand for corporate connectivity, managed service solutions, and cloud-based services.

 

LEADING THE SHIFT TO THE DIGITAL LIFESTYLE

 

Throughout our company's history, Globe has always led innovations in mobile because of strong consumer demand. As a result, we gained recognition for being a mobile-first company. However in the past, we were relating to our customers in the manner of a utility company. A lot has changed since then, as we focus on the changing habits of our customers and the way they use technology in their daily lives.

 

In 2009, we started offering customizable services that put the customers first—giving them the power of choice to subscribe to postpaid plans and prepaid promos that are attuned to their needs and budgets.

 

We have since evolved into becoming the purveyor of the digital lifestyle, serving the growing demand for lifestyle and entertainment-driven connectivity needs: music, video, gaming, information, commerce, shopping, banking, movies and TV series, and social media. While still in its early stages, we entered into this ecosystem by forging collaborative partnerships with global giants in the world of content, in addition to our existing content providers such as Spotify, HOOQ, Disney, and NBA.

 

In 2016, we became the mobile and broadband Philippine partner of the foremost video streaming service Netflix, which boasts of over 81 million members in over 190 countries who are enjoying more than 125 million hours of TV shows and movies per day, including original series, documentaries, and feature films.

 

We also brought in Disney Channel and Cartoon Network for our younger audiences, as well as Malaysian media powerhouse Astro to give Filipinos access to eGG Network or Every Good Game, Southeast Asia’s first dedicated 24/7 e-Sports network.

 

As we partnered with global iconic brands, we likewise altered the landscape of Philippine entertainment with Globe Studios and Globe Live, two new businesses designed to stimulate growth in the local entertainment industry. Our opening salvo was the production of our first full-length movie and a nine-episode series airing on HOOQ. By creating original shows, live events, and feeding content that is relevant to the Filipino, we strengthened our stronghold as the preferred mobile content provider of our customers.

 

Revolutionizing the Philippine retail and entertainment industry, we also opened a US$7-million ICONIC store at Bonifacio Global City that features a live entertainment venue complete with two massive Times Square-like LED walls that provide live video feed and on-ground entertainment.

 

In 2016, we mounted successful large-scale live events such as Green Day’s American Idiot and the “A Christmas Carol” musical, as well as NBA Fit and a series of HOOQ Hangouts. Not only does the ICONIC store serve as the premiere lifestyle destination of Globe, the entertainment facility can lay claim as the most innovative and experiential retail telco store in the world.

 

CONNECTING EVERY HOME

 

Offering content that people want to consume also drove the use of data at home. However, majority of our fixed-line customers only experience internet speeds ranging from 1-2 Mbps. To improve connectivity at home, we have to roll out fiber and update our copper infrastructure as fast as we can so we can extend faster internet connectivity for families.

 

For the Philippines to take full advantage of new digital opportunities, we need to create an Internet superhighway and provide ultra-fast internet connection that will enable growth in every corner of our country. We launched an initiative to deploy ultra-fast internet service in 20,000 barangays all over the country within the next five (5) years to provide faster and more reliable internet access in about 2 million homes nationwide. We want to make use of technological innovations to make internet service experience at par with other countries in the world.

 

As our “proof of concept” of how we are ushering the Philippines to become a digital nation by 2020, we collaborated with the city government of Manila to install fiber broadband throughout the Binondo district, providing world-class internet experience with speeds of up to 1 Gbps to the world's oldest Chinatown and one of the main hubs of SME activity in the metro.

 

To complement our massive infrastructure buildup, we also launched exciting new revolutionary Globe Broadband plans that allow our customers to make their home the ultimate hub for groundbreaking entertainment and elevate their digital lifestyle. In November 2016, we unveiled a 10 Mbps connection plan that can be availed for as low as P1,299 a month, which includes a 100 GB data allocation with six months free subscription to NBA League Pass, Netflix, and HOOQ.

 

GOING FULL THROTTLE ON EXPANSION

 

To fulfill our commitments, Globe went full throttle in expanding our network infrastructure and capacity to enhance the internet experience of our customers.

 

In May, we initiated the acquisition of additional frequency assets from San Miguel Corporation-owned Vega Telecom. Most important in the asset base was the spectrum in various frequencies: 700 MHhz, 1800 MHz, and 2600 MHz which we consider as prime real estate from which to broadcast the LTE spectrum, the main 4G vehicle for mobile data transport. As we roll out and fully maximize the use of these spectrums, the public can expect vast improvements in their overall customer experience in terms of speed and reliability of mobile internet services of Globe.

 

Barely half a year since acquiring the stranded assets of SMC, we hit our target of deploying over 500 LTE sites using the 700 MHz band (L700), a majority of which were deployed in Metro Manila and other highly populated areas where majority of customers using LTE-based handsets are located. We also activated over 1,200 additional LTE sites using the additional spectrum allocation in the 2600 MHz band, which mostly benefitted customers in Metro Cebu and Metro Davao.

 

With these, Globe is well on its way of achieving our target to deploy about 4,500 multiband, multimode software-defined radio base station equipment in 95% of cities and municipalities in the country within a 3-year period, as committed to the National Telecommunications Commission (NTC).

 

Our GoWiFi service, a premium open national WiFi network launched in 2015, has expanded to over 6,300 access points by the end of 2016. GoWiFi is now available in all major airports, water ports, major malls, convenience store chains, food and beverage establishments, schools, universities, and government offices.

 

We are also deploying WiFi services at all MRT Line 3 stations and all 20 LRT stations to enable 1.5 million daily passengers and Globe customers riding the MRT to efficiently make use of their transit time through internet access.

 

BUILDING AN ADMIRED NATION

 

All these efforts are in support of our campaign to make the Philippines an admired nation globally by having first-world internet connectivity.

 

We are emboldened by the fact that the Philippines is now the highest among 15 countries in Asia Pacific in terms of average connection speeds for mobile connection, with 14.3 Mbps speed, according to the 4th Quarter Akamai State of Internet Report of Akamai Technologies. The country also achieved 105.1 Mbps peak mobile speed in the 2nd quarter of 2016, the third highest in Asia Pacific after Australia and Thailand.

 

But there is still much to do. As more and more Filipinos depend on fast and reliable internet connectivity, telco operators must all work closely with the national government and local government units, particularly in addressing the circuitous permitting process in the establishment of telecommunication infrastructure such as cell sites. It is thus no surprise that the Philippines lags behind its Asian neighbors in terms of total cell sites.

 

As we deploy more LTE sites in 2017 using our additional spectrum assets, we will further accelerate our network build and collaborate with various local government units, homeowner associations, and other government agencies on workable solutions that will enable Globe to stay ahead in meeting rising consumer demands.

 

SUSTAINING OUR BUSINESS

 

Not many companies can transform their business at a time of exhilarating change because it puts to test the level of employee engagement and resiliency. Globe enters the rank of global high performing organizations powered by a highly engaged workforce that does many things at once: maintain a strong core business, bring first-to-market products and services, and grow new businesses while being fueled by an inexorable passion for innovation. Underpinning all these is a strong commitment to look farther than business by caring for the environment and our impact to communities at large.

 

As our employees live out our values at the heart of our Circle of Happiness where engaged employees result in delighted customers and happy stakeholders, we are inspired by their collective dedication to our customers and willingness to do a Globe of Good. Employee volunteerism reached an all-time high at 45% of total employee base where 3,222 employees shared 51,552 man-hours and P883,793.77 financial donations.

 

One area that showcases employee commitment to Put Customers First is during disaster. In response to the UN SDG 9 that calls for building resilient infrastructure to support human wellbeing, we continue to build a better network to harness mobile and ICT solutions that empower public service and help uplift public welfare—from emergency response to disaster preparedness and management. When different parts of Luzon were devastated by Super Typhoon Lawin and Typhoon Nina, Globe in partnership with the National Disaster Risk Reduction Management Council (NDRRMC), transmitted mobile disaster alerts via SMS containing vital information that communities at risk can use to prepare for and respond to disaster. This early warning service helps increase survivability rates and reduce cost of damage to properties. Immediate disaster response provided by Globe include free calls and text services, free charging, and internet stations in severely hit provinces to connect families with their loved ones at the most critical moment. Priority was also given to relief operations distributing food and water to affected communities.

 

Yet perhaps the most effective response we gave was the immediate restoration of mobile services within 24 hours after the typhoons hit land.

 

Having an expansive network also translates to a large business footprint, so it is inevitable for us to recognize our responsibility to mitigate the effects of climate change. We continue to invest in a low carbon future by encouraging more customers to shift to paperless billing to reduce waste, as well as raise public awareness on adopting lifestyles that are in harmony with nature. We entered into a five-year partnership with Hineleban Foundation to preserve and restore rainforests and watersheds, involving indigenous peoples in Bukidnon and Lanao del Sur that help provide food security for them. These programs respond to SDG 12 that calls for responsible consumption and production and SDG 15 on sustaining life on land.

 

We promote inclusion by having over 1,500 Department of Social Welfare and Development (DSWD) beneficiaries employed as broadband sales agents and airtime load retailers thus responding to SDG 8 that calls for decent work and economic growth. Filipino micro-enterprises are likewise assisted through our partnership with KIVA, a US-based humanitarian organization present in over 80 countries, by tapping on our customer base to support local entrepreneurs through an online donation platform. At least P20 million was generated through various sustainable livelihood programs directly benefitting the base of the pyramid sector.

 

MOVING FORWARD

 

We expect 2017 to bring more opportunities for business growth while creating new challenges, particularly as we manage our capex budget, roll out more fiber optic connection across cities, develop more compelling content, deliver a pervasive and reliable internet service where it matters while living out our new purpose of creating a Globe of Good for our customers, employees, partners, communities, and stakeholders.

 

Much has been achieved in 2016, yet much more still needs to be done especially as we endeavor to remain true to our promise of delivering superior customer experience. We are confident that our advocacy to gain reforms in the sector can only translate to the fulfillment of our collective aspirations of having first world internet connectivity in the country. After all, we are armed with two key elements essential for any company to succeed over the long term: a strong, customer-centric culture, and a purpose to build a better future for the nation.

 

 

Ernest Cu

President and CEO