Globe Telecom girds for 3G growth

REPORT FROM BUSINESSWORLD Ayala-owned Globe Telecom, Inc. plans to borrow some $130 million this year to support its planned capital spending, company President Gerardo C. Ablaza told reporters on Tuesday following the firm’s first-quarter investor briefing. The firm reported a 19% jump in income during the first three months of the year to P3.453 billion from P2.904 billion a year ago, citing trimmed cost of operation and higher mobile subscribers. Globe vice-president for financial control division Edith C. Santiago said at least five banks approached the company and gave "indicative offers" when they learned of Globe’s plan. Of the five, she named Bank of the Philippine Islands Capital Corp. (BPI Capital) and Deutsche Bank. Mr. Ablaza said of the planned borrowing, some $50 million-$70 million would be for putting up base stations, or cellular sites to support its 3G (third-generation) services. "The plan is to put up 1,000 base stations when we expect that 3G subscribers will grow," Mr. Ablaza noted. Globe currently has installed 150 base stations for its 3G network. Mr. Ablaza said the National Telecommunications Commission (NTC) has allowed them to put up 2,500 base station in a span of five years until 2011. 3G has been repeatedly cited as the next major revenue stream for local mobile phone companies, which have reaped windfall profits but face decelerating revenue growth due to competition and saturating subscriber penetration. Riding on low borrowing interest rates, Mr. Ablaza said the amount to be borrowed for its capex would be in peso and in dollars denominations. "The company will still study the mix," Ms. Santiago said. Mr. Ablaza explained that the borrowing would include peso denomination to take advantage of the low interest rates for peso borrowings. Treasury bill rates have started to reverse their decline, with the yield on the benchmark 91-day paper rising to 4.768% at the last auction on May 2 from 4.62% previously. Globe officials said they will get back to the banks that gave indicative offers once it finalizes the amount of borrowing for the year. Meanwhile, Mr. Ablaza said Globe is interested in the assets of Lopezowned telco provider, Bayan Telecommunications (BayanTel). Mr. Ablaza said Globe and BayanTel are still on "exploratory talks." Globe started talking to BayanTel in 1998 but until now, no agreement has been reached. If the plan pushes through, Globe would beef up its wireline business, trimming the margin with Philippine Long Distance Telephone Co. (PLDT) which has the largest number of wirelines installed. However, Globe is not in a hurry to strike a deal. Mr. Ablaza did not even give a target date for the plan. He said so far, those assets of BayanTel that are attractive to Globe are the copper lines or installed network. -- -Paolo Joseph L. Lising/BusinessWorld