Finals presentation on Globe Telecom Financial Management (MBA) Middle Manager Program Dec 3 2014

1. FINALS PRESENTATION
CHARLES VINZON RACELIS
MM PROGRAM, ATENEO GRADUATE SCHOOL OF BUSINESS
FINANCIAL MANAGEMENT, PROF. DENSING III (DEC. 2014)
Let’s create a wonderful world

2. COMPANY BACKGROUND
Globe Telecom, Inc. is a major provider of telecommunications services in the Philippines,
supported by over 5,900 employees and over 855,000 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.
Globe currently has about 38.5 million mobile subscribers, over 2,000,000 broadband
customers, and over 594,000 million landline subscribers.

3. COMPANY INFORMATION
MISSION:
We create a wonderful world for people, businesses and the nation.
VISION:
The happiest customers, employees and shareholders.
VALUES:
(1) We put our customers first. (2) Our people make the difference. (3) We act with integrity.
(4) We care like an owner. (5) We keep things simple. (6) To us, it's be fast or be last.

4. INCOME STATEMENT
PERIOD ENDING 2013 2012
Revenue
Service Revenue Php 90,500,137 Php 82,742,565
NonService Revenue Php 4,640,848 Php 3,703,584
Gross Profit Php 95,140,985 Php 86,446,149
Expenses
Cost of Sales Php 9,953,106 Php 7,678,359
General, Selling and Administrative Php 37,318,839 Php 33,602,411
Total Operating Expenses Php 47,271,945 Php 41,280,770
Interest Income Php 688,249 Php 579,851
Disposal of property and Equipment Php 64,333 Php 42,447
Other Income Php 475,246 Php 716,371
Php 1,227,828 Php 1,338,669
Depreciation and Amortization Php 27,477,494 Php 23,583,417
Other Expenses Php 12,662,686 Php 11,179,633
Php 40,140,180 Php 34,763,050
Earnings Before Interest and Taxes Php 8,956,688 Php 11,740,998
Interest Expense Php 2,091,915 Php 1,989,451
Income Before Income Tax Php 6,864,773 Php 9,751,547
Provision for Income Tax (Tax Cost) Php 1,904,528 Php 2,906,293
NET INCOME Php 4,960,245 Php 6,845,254
FINANCIAL
STATEMENTS
*in thousand pesos

5. *in thousand pesos
BALANCE SHEET
PERIOD ENDING 2013 2012
ASSETS
Current Assets
Cash and Cash Equivalents Php 7,420,735 Php 6,759,755
Net Receivables Php 15,200,923 Php 12,105,437
Inventory Php 3,544,887 Php 2,076,176
Other Current Assets Php 9,464,657 Php 13,086,990
Total Current Assets Php 35,631,202 Php 34,028,358
Noncurrent Assets
Property and Equipment Php 110,424,072 Php 101,422,364
Investment Property Php - Php -
Intangible Assets and Goodwill Php 3,840,660 Php 3,793,958
Deferred Income Tax Assets Php 1,916,878 Php 1,016,856
Other noncurrent assets Php 7,266,121 Php 7,750,243
Total Noncurrent Assets Php 123,447,731 Php 113,983,421
Total Assets Php 159,078,933 Php 148,011,779
FINANCIAL
STATEMENTS
PERIOD ENDING 2013 2012
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and
Accrued Expenses Php 39,486,830 Php 29,734,126
Notes Payable Php 5,219,900 Php 2,053,900
Current Portion of Long-term debt Php 5,980,300 Php 9,294,888
Income Tax Payable Php 1,028,263 Php 1,341,583
Other Current Liabilities Php 3,274,038 Php 3,401,487
Total Current Liabilities Php 54,989,331 Php 45,825,984
Noncurrent Liabilities
Long-term debt - Net of current portion Php 58,100,749 Php 50,430,632
Deferred income tax liabilities Php - Php 2,271,345
Other Non-Current Liabilities Php 4,349,602 Php 3,785,827
Total Noncurrent Liabilities Php 62,450,351 Php 56,487,804
Total Liabilities Php 117,439,682 Php 102,313,788
Stockholders' Equity
Paid-up Capital Php 34,402,396 Php 34,095,976
Cost of Share-Based Payments Php 261,144 Php 472,911
Other Reserves Php (739,575) Php (526,539)
Retianed Earnings Php 7,715,286 Php 11,655,643
Total Stockholders' Equity Php 41,639,251 Php 45,697,991
Total Liabilities and SE Php 159,078,933 Php 148,011,779

6. RATIO ANALYSIS
Liquidity 2013 2012
Current 0.65 0.74
Quick
0.58 0.7
Profitability 2013 2012
Gross Profit Margin 50% 52%
Operating Profit Margin 9% 14%
Growth 2013 2012 Debt to Equity (Gross) 1.66
43.84 21.12
Net Profit Margin
EBITDA Margin
EPS
Price-Earnings Ratio
5% 8%
38% 41%
37.41 51.7
Capital Structure 2013 2012
Debt to EBITDA 1.90 1.76
Debt to Service Coverage 2.83 2.02
1.35
Debt to Equity (Net) 1.49 1.2
Sales 10% 6%
Net Income -28% -30%
-26%
Earnings Per Share -32%
Dividends per Share 3% 5%
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;
• Debt service coverage exceeding 1.3 times; and.
As of 31 December 2013, Globe is well within the
ratios prescribed under its loan agreements.

7. HORIZONTAL
ANALYSIS
INCOME STATEMENT 2013 - 2012 2012 - 2011
Increase or (Decrease) Increase or (Decrease)
PERIOD ENDING Amount Percentage Amount Percentage
Revenue
Service Revenue Php 7,757,572 9% Php 4,977,601 6%
NonService Revenue Php 937,264 25% Php (49,699) -1%
Gross Profit Php 8,694,836 10% Php 4,927,902 6%
*in thousand pesos
Expenses
Cost of Sales Php 2,274,747 30% Php 1,790,770 30%
General, Selling and Administrative Php 3,716,428 11% Php 4,188,805 14%
Total Operating Expenses Php 5,991,175 15% Php 5,979,575 17%
Interest Income Php 108,398 19% Php 282,463 95%
Disposal of property and Equipment Php 21,886 52% Php (276,803) -87%
Other Income Php (241,125) -34% Php 141,603 25%
Php (110,841) -8% Php 147,263 12%
Depreciation and Amortization Php 3,894,077 17% Php 4,642,190 25%
Other Expenses Php 1,483,053 13% Php (1,169,803) -9%
Php 5,377,130 15% Php 3,472,387 11%
Earnings Before Interest and Taxes Php (2,784,310) -24% Php (4,376,797) -27%
Interest Expense Php 102,464 5% Php (70,209) -3%
Income Before Income Tax Php (2,886,774) -30% Php (4,306,588) -31%
Provision for Income Tax (Tax Cost) Php (1,001,765) -34% Php (1,347,291) -32%
NET INCOME Php (1,885,009) -28% Php (2,959,297) -30%

8. BALANCE SHEET 2013 - 2012 2012 - 2011
Increase or (Decrease) Increase or (Decrease)
HORIZONTAL
ANALYSIS
2013 - 2012 2012 - 2011
Increase or (Decrease) Increase or (Decrease)
*in thousand pesos
PERIOD ENDING Amount Percentage Amount Percentage
ASSETS
Current Assets
Cash and Cash Equivalents Php 660,980 10% Php 1,600,709 31%
Net Receivables Php 3,095,486 26% Php 1,985,932 20%
Inventory Php 1,468,711 71% Php 164,986 9%
Other Current Assets Php (3,622,333) -28% Php 6,712,484 105%
Total Current Assets Php 1,602,844 5% Php 10,464,111 44%
Noncurrent Assets
Property and Equipment Php 9,001,708 9% Php 2,154,584 2%
Investment Property
Intangible Assets and Goodwill Php 46,702 1% Php 202,444 6%
Deferred Income Tax Assets Php 900,022 89% Php 151,948 18%
Other noncurrent assets Php (484,122) -6% Php 5,165,029 200%
Total Noncurrent Assets Php 9,464,310 8% Php 7,482,360 7%
Total Assets Php 11,067,154 7% Php 17,946,471 14%
LIABILITIES & STOCKHOLDERS' EQUITY Amount Percentage Amount Percentage
Current Liabilities
Accounts Payable and
Accrued Expenses Php 9,752,704 33% Php 6,692,775 29%
Notes Payable Php 3,166,000 154% Php 297,140 17%
Current Portion of Long-term debt Php (3,314,588) -36% Php (302,479) -3%
Income Tax Payable Php (313,320) -23% Php 183,656 16%
Other Current Liabilities Php (127,449) -4% Php (31,040) -1%
Total Current Liabilities Php 9,163,347 20% Php 6,840,052 18%
Noncurrent Liabilities
Long-term debt - Net of current portion Php 7,670,117 15% Php 13,106,053 35%
Deferred income tax liabilities Php (2,271,345) -100% Php (1,396,090) -38%
Other Non-Current Liabilities Php 563,775 15% Php 1,284,184 51%
Total Noncurrent Liabilities Php 5,962,547 11% Php 12,994,147 30%
Total Liabilities Php 15,125,894 15% Php 19,834,199 24%
Stockholders' Equity
Paid-up Capital Php 306,420 1% Php 128,500 0%
Cost of Share-Based Payments Php (211,767) -45% Php (100,525) -18%
Other Reserves Php (213,036) 40% Php (122,184) 30%
Retianed Earnings Php (3,940,357) -34% Php (1,793,519) -13%
Total Stockholders' Equity Php (4,058,740) -9% Php (1,887,728) -4%
Total Liabilities and SE Php 11,067,154 7% Php 17,946,471 14%

9. BUSINESS PLAN
OBJECTIVE:
To offer the best possible,
affordable, consistent internet
connection for our customers.
Based on Akamai State of the
Internet report of Q4 2013
showed the Philippines had an
average of 2Mbps and being
ranked as 108th country in the
list of connection speed.
Presently, the Philippines has
moved up to 2.5Mbps ranking
at 103rd as of Q3 2014

10. PHILIPPINE MOBILE MARKET
The Philippine mobile market has an industry SIM base of 109 million.
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.
The Company ended 2013 with 38.5 million mobile subscribers/SIMs, comprised
of 2.0 million postpaid and 36.5 million prepaid subscribers. Meanwhile, Globe
has around 595,000 fixed line voice subscribers and around 2.0 million
broadband customers.

11. THE STATE OF PHILIPPINE
INTERNET USAGE 2013

12. THE STATE OF PHILIPPINE
INTERNET USAGE 2013

13. PHILIPPINE MOBILE MARKET
CURE Digitel
Smart Piltel
Innove Bayantel
Extelcom

14. STRATEGY
PRODUCT DEVELOPMENT
Capital Expenditure is (26%)
One Billion spent for
investment on international
cable systems.
650 Million for IT and
network transformation and
modernization program
MARKET PENETRATION
Increasing market share (35% to 50%) by 2016 from the latest
products and services for internet connectivity in the growing
market.
Invest in traditional services;
building more sites & incorporating
needed in-building solutions to
address coverage of blind spots
brought about by the changing
skyline in urban areas.
Continue to offer the best value-for-money
services to its subscribers.

15. 2014
To complete IT and network transformation and modernization
program in Metro Manila.
To offer the best value-for-money services to its subscribers.
(Promotions such as free access to facebook, google search)
To develop a team for Research and Development for
hardware and software solutions in the telecom industry.
To continue to maintain traditional services; building more sites & incorporating
needed in-building solutions to address coverage of blind spots.

16. 2015
To provide higher speed in internet connectivity (5.5Mbps average) at the
optimum price.
To have the Philippines included in the top 60 global ranking in terms of
average Mbps in the Asia Pacific region..
To continue the IT and network transformation and modernization program
at key regions in the Philippines .
To increase the sales revenue in fixed line, broadband and mobile
browsing by 60%.
To attain 90% consistency in internet connectivity and speed within Metro
Manila.

17. 2016
To reach 50%
market share in
the Philippine
Mobile Industry.
To increase the
sales revenue in
fixed line,
broadband and
mobile browsing
by 30%.
To attain 90%
consistency in
internet
connectivity and
speed within
urban areas.

18. FORECAST ASSUMPTIONS
2016 2015 2014 2013
Capital Expenditure (15%) Php
54,417
Php
47,319
Php
41,147
Php
35,780
International
Cable System (20%)
Php
1,728
Php
1,440
Php
1,200
Php
1,000
Transformation and
Modernization Program
Php
650
Php
650
Php
650
Php
650
*in Million pesos

19. FORECAST ASSUMPTIONS
Sales Revenue 2016 2015 2014 2013
Internet Connectivity
Mobile Browsing
Php
29,444
Php
22,649
Php
14,156
Php
11,603
Broadband
Php
26,493
Php
20,379
Php
12,737
Php
10,440
Fixed Line
Php
11,904
Php
9,157
Php
5,723
Php
4,691
*in Million pesos

20. FORECAST ASSUMPTIONS
2016 2015 2014 2013
Service and Non-Service
Php
91,050
Php
82,772
Php
75,248
Php
68,407
Internet Connectivity
Php
67,840
Php
52,185
Php
32,615
Php
26,734
Total Sales Revenue
Php
158,890
Php
134,957
Php
107,863
Php
95,141
*in Million pesos

21. FORECAST
INCOME
STATEMENT
*in thousand pesos
INCOME STATEMENT
PERIOD ENDING 2014 2015 2016
Revenue
Service Revenue Php 102,678,180 Php 127,671,238 Php 149,758,915
NonService Revenue Php 5,815,305 Php 7,286,981 Php 9,131,093
Gross Profit Php 108,493,485 Php 134,958,219 Php 158,890,009
Expenses
Cost of Sales Php 12,901,757 Php 16,723,958 Php 21,678,502
General, Selling and Administrative Php 41,446,304 Php 46,030,267 Php 51,121,216
Total Operating Expenses Php 54,348,061 Php 62,754,225 Php 72,799,719
Interest Income Php 816,911 Php 969,625 Php 1,150,888
Disposal of property and Equipment Php 97,504 Php 147,777 Php 223,972
Other Income Php 592,330 Php 738,260 Php 738,260
Php 1,506,745 Php 1,855,662 Php 2,113,120
Depreciation and Amortization Php 32,014,558 Php 37,300,779 Php 43,459,857
Other Expenses Php 14,342,476 Php 16,245,101 Php 18,400,122
Php 46,357,034 Php 53,545,880 Php 61,859,980
Earnings Before Interest and Taxes Php 9,295,135 Php 20,513,776 Php 26,343,431
Interest Expense Php 2,199,656 Php 2,312,947 Php 2,432,072
Income Before Income Tax Php 7,095,479 Php 18,200,830 Php 23,911,359
Provision for Income Tax (Tax Cost) Php 1,986,734 Php 5,096,232 Php 6,695,180
NET INCOME Php 5,108,745 Php 13,104,597 Php 17,216,178

22. FORECAST
BALANCE
SHEET
*in thousand pesos
BALANCE SHEET
PERIOD ENDING 2014 2015 2016
ASSETS
Current Assets
Cash and Cash Equivalents Php 14,926,986 Php 13,728,474 Php 22,924,174
Net Receivables Php 19,087,957 Php 23,968,946 Php 30,098,054
Inventory Php 6,052,581 Php 10,334,247 Php 17,644,814
Other Current Assets Php 6,844,945 Php 4,950,341 Php 3,580,142
Total Current Assets Php 46,912,469 Php 52,982,008 Php 74,247,184
Noncurrent Assets
Property and Equipment Php 120,224,724 Php 130,895,229 Php 142,512,791
Investment Property
Intangible Assets and Goodwill Php 3,887,937 Php 3,935,796 Php 3,984,244
Deferred Income Tax Assets Php 2,253,637 Php 1,195,498 Php 1,016,856
Other noncurrent assets Php 6,812,240 Php 6,386,711 Php 5,987,762
Total Noncurrent Assets Php 133,178,538 Php 142,413,233 Php 153,501,653
Total Assets Php 180,091,007 Php 195,395,242 Php 227,748,837
LIABILITIES & STOCKHOLDERS' EQUITY
Total Current Liabilities Php 62,252,643 Php 67,542,907 Php 78,726,679
Total Noncurrent Liabilities Php 70,699,158 Php 76,707,212 Php 89,408,412
Total Liabilities Php 132,951,800 Php 144,250,119 Php 168,135,091
Total Stockholders' Equity Php 47,139,206 Php 51,145,122 Php 59,613,745
Total Liabilities and SE Php 180,091,007 Php 195,395,242 Php 227,748,837

23. REFERENCES
o www.abs-cbnnews.com/business/10/02/14/philippines-still-
has-one-slowest-internet-speeds-asia
o www.akamai.com/dl/akamai/akamai-soti-q413.pdf
o www.forward.ph/blog/the-state-of-philippine-internet-usage-
2013-infographic/
o SEC FORM 17A GLOBE 2013 (Annual Report)