GLOBE TELECOMMUNICATIONS REPORT

In partial fulfillment of the requirement for the subject

Advanced Accounting I

By

Pacana, Patricia Deanne M.

Submitted to

Ma’am Carmencita de Mesa

Submitted on
March 22, 2019
TABLE OF CONTENTS

I. EXECUTIVE SUMMARY 1

II. COMPANY OVERVIEW 2

III. MARKETING STRATEGY 9

IV. QUANTITATIVE ANALYSIS 14

a.) Ratio Analysis 14

b.) Consolidated Financial Statements 2016 18

c.) Common Size Analysis 24

V. QUALITATIVE ANALYSIS 31

VI. SUMMARY ANALYSIS 34

VII. RECOMMENDATION & CONCLUSION 36

VIII. BIBLIOGRAPHY 37

1
I. EXECUTIVE SUMMARY

Sa Globe, abot mo ang mundo.

Globe Telecom Incorporated is a major provider of telecommunications services
in the Philippines. It is comprised of over 5, 700 employees and 782,000 retailers and
distributors nationwide. It also operates as one of the largest telecom companies in the
Philippines, known to provide reliable services to its end and organizational users. Globe
currently has over 30 million mobile subscribers, over 65.8 million mobile subscribers,
nearly 3.5 million broadband customers, and 859 000 landline subscribers. (Globe
Telecom Incorporated, 2017) It is listed on the Philippine Stock Exchange under the
name GLO and had a market capitalization of US$7.4 billion as of the end of June 2015.
(The Wall Street Journal, 2017) Currently, the company ranks 2nd in terms of total
assets, revenues and number of subscribers in the telecommunication industry in the
entire Philippines.
The telecommunication industry in the Philippines is strictly for those who have
the capital to actually begin operations and gull to actually go against the established
giants already in the loop. This makes it hard for new, unknown players to enter the said
industry. This gives those who wish to participate in the industry two choices: risk more
by introducing a new brand to the market or invest in those who are already in the loop.
Also, the strong growth of data usage makes the telecommunication industry in the
Philippines an attractive industry to invest in. The Philippines was not known as the
social media capital of the world for nothing.
This document aims to show the sustainability of an investment in Globe
Telecommunications Incorporation for those who are open to the idea of investing in the
company. This was made according to the real and comparable financial statements of the
company, as well as regulated by the current political climate and changes in economic
policies and outlook in the country of base operations. In line with this, the document
presents the available financial ratios of Globe Telecoms in the past years from 2011-
2019, the current consolidated financial statements passed to the BIR, and an analysis on
the sustainability of investments in the company. This aims to give future investors an
idea on how their investments in Globe can be championed by the company in the
growing market

1
II. COMPANY OVERVIEW

Company History
Globe Telecom, Inc. is the number one mobile brand in the Philippines and the
spearheads of the Filipino digital lifestyle. The company provides cellular, broadband and
mobile data services by focusing on improving the services they are able to provide to
consumers by always being on the lookout for advancements in technologies across the
world that they can bring to the Philippines to keep the country’s services at par with
those in the international scene.
It was originally incorporated on January 16, 1935 as Globe Wireless Limited
with a franchise to operate wireless long distance message services in the Philippines.
The Company eventually changed its name to Globe Telecommunications Incorporated
in 1992, and welcomed Singapore Telecom, Inc. as a new foreign partner the following
year. (Globe Telecom Incorporated, 2017)
In line with it’s motto to provide only the absolute best to its customers, Globe
Telecom is fired up over providing the country's first cell site that utilized the 700
megahertz spectrum, generating speeds that ranged between 60-100 Mbps, a 100%
increase in competitor PLDT’s 50 mbps Fiber connection. The company expects to
deliver performance improvements as it completes the ongoing utilization of the said site.
The move came less than a week after Globe acquired half of San Miguel Corp.'s
telecommunication assets, which included said 700 MHz frequency. Agustin, Globe
Senior Vice President for Program Governance, said the company plans to roll out
initially about 200 sites using this particular frequency. (Globe Telecommunications Inc.,
2016)
The Board of Directors of Globe Telecom, Inc. through its Executive Committee, also
recently approved the acquisition and signing of a sale and share purchase agreement and
other related definitive agreements for the following Entities (Globe Telecommunications
Inc., 2016):
 50% of the issued and outstanding capital stock of Vega Telecom, Inc.
 50% of the issued and outstanding capital stock of Bow Arken Holdings
Company Inc. and,
 50% of the issued and outstanding capital stock of Brightshare Holdings
Corporation

2 2
II. COMPANY OVERVIEW

Globe is also a member of Bridge Alliance, Asia Pacific's leading mobile alliance
of 36 mobile carriers with a combined customer base of over 680 million. Globe operates
internationally with presence in over ten countries and 736 roaming partners. This gives
Globe a potential in pursuing an international presence in the near future. This move will
be beneficial to the brand itself and of course, it’s stockholders. This journey began when
Globe widened its global footprint through a partnership deal with Orange's Libon
application. Globe is showing constant effort in providing its customers with the best
possible services that any telecommunications company across the world can offer.

Vision, Mission, and Values

VISION:
We see a Philippines where families' dreams come true, businesses
flourish, and the nation is admired.

MISSION:
We create wonderful experiences for people to have choices, overcome
challenges, and discover new ways to enjoy life.

CORE VALUES:
And we do this the Globe way...
We put customers first.
We value people and together, we make the difference.
We act with integrity.
We care like an owner.
We keep things simple.
We move fast, we are better, every day.
This keeps our Circle of Happiness spinning...
Employees feel empowered and find meaning at work. Customers feel special and
valued. Shareholders feel confident and rewarded

3
II. COMPANY OVERVIEW

Management Team

The Board of Directors is Globe’s highest governance body. It is tasked to establish

with utmost importance the company’s vision, mission, and values. They are also
responsible for the strategic directions that will be undertaken by the company in the
future, and liable for any decision that will lower the company shares’ intrinsic value in
the market. They aim for the highest levels of transparency, accountability, integrity and
fairness, and are maintained to protect the long-term interests of its stakeholders. The
board also oversees the overall acquisition of assets, liabilities, and other aspects of the
economic standing of the company itself. It must regulate the company’s annual
acquisition of debts and payables that can harm the company in the higher dosages.
Mr. Ernest L. Cu, 56, Filipino, has served as Executive Director, President and CEO
of Globe since April 2009. Mr. Cu brings with him over two decades of general
management and business development experience spanning multi-country operations.
Mr. Cu earned his Bachelor of Science in Industrial Management Engineering from De
La Salle University in Manila and his Master of Business Administration from the J.L.
Kellogg Graduate School of Management, Northwestern University. He is the
Philippines’ Best CEO according to FinanceAsia, with Globe ranking as 3rd Best
Managed Company in the country and also cited in several other categories.
According to FinanceAsia, a leading publisher of financial news in the Asia Pacific
region, Cu bagged the top spot in the Best CEO category with 23 points. Globe also
placed 3rd in Best at Investor Relations, 4th in Best at Corporate Social Responsibility,
and ranked 6th in Most Commitment to Corporate Governance.(Inquirer, 2017)
The company also has 10 non-executive directors; Jaime Augusto Zobel de Ayala,
Arthur Lang Tao Yih, Fernando Zobel de Ayala, Delfin L. Lazaro, Samba
Natarajan, Romeo L. Bernardo, Jose Teodoro K. Limcaoco, Rex Ma. A.
Mendoza, Manuel A. Pacis, and Saw Phaik Hwa. (Globe Telecommunications Inc.)

4
II. COMPANY OVERVIEW

Legal Structure and Ownership

The following are the major stockholders of Globe Telecom as of 30 June 2017 (Globe
Telecommunications Incorporated, 2017)

% of
Non-
% of % of Non- % of
StockholdersCommon Preferred Voting Total
Common Preferred Voting Total
Preferred
Preferred
Ayala Corp 41,164,276 30.97% - - - - 41,164,276 13.22%
SingTel 62,646,487 47.13% - - - - 62,646,487 20.12%
Asiacom - - 158,515,016 100.00% - - 158,515,016 50.90%
Directors,
Officers, 300,660 0.23% 5 0.00% - - 300,665 0.10%
ESOP
Public 28,803,106 21.67% - - 20,000,000 100.00% 48,803,106 15.67%
Total 132,914,529 100%158,515,021 100.00%20,000,000 100.00%311,429,550100.00%

The Company’s principal shareholders are Ayala Corporation and Singapore

Telecom, both industry leaders in their respective countries. Aside from providing
financial support, these partnerships have aided Globe in its aim to provide world-class
services to the Filipino people.
In line with the established core values of the company, Globe has paid constant
effort and attention in the betterment of the company’s responsibility to the economy and
to the Filipinos, here and across the entire world. Globe is committed to being a
responsible corporate citizen. Globe BridgeCom, the company’s umbrella corporate
social responsibility program, aims to contribute to creating a wonderful world through
relevant and innovative solutions that harness the power of collaboration and information
and communications technology. The objective is to ensure sustainability and harmony
inside the company by making sure that the right values are shared among the employees,
customers, and beneficiaries. As the business continues to grow, Globe continues to
contribute to nation-building and shareholder value with an engaged and empowered
workforce committed to doing a Globe of good. (Bridging Communities, 2015)
The following are the major stockholders of Globe Telecom as of 30 June 2015:
 Ayala Corporation: 13.85% (with common shares of 40,351,591)
 SingTel: 21.51% (with common shares of 62,646,487)

5
II. COMPANY OVERVIEW

 Asiacom: 54.43% (With preferred shares of 158,515,016)

 Directors, Officers, ESOP: 0.07% (With common shares of 205,027; preferred
shares of 5)
 Public Stock : 10.14% (With common shares of 29,537,111)

Products of the Company

 Data Promos- these kinds of products cater
to those who do not wish to enter into a 2-year
contract with the company but wish to surf the
internet in their most convenient time.

 Call Promos- these kinds of promos are to

cater to those who wish to communicate to
their loved ones over a phone call, without
having to break the bank by paying per
minute of the call

 Text Promos- these kinds of promos are for

those who wish to communicate via written
text without having to pay for each individual
text. Some promos also cater to texting other
Networks without having to pay double
Or triple the amount normally paid by
Globe to Globe texts.

 Postpaid Plans- these plans are for the consumers

who are willing to enter into a two-year contract
with Globe for texts, calls, data, and the newest
mobile phones to date.

6
II. COMPANY OVERVIEW

 International Direct Dialing- these promos are

for the Filipinos who are travelling to another
country for leisure, or for those OFWs who are
travelling for work but still wish to stay in touch
with their loved ones in the Philippines. This
gives them cheaper alternatives.

 Accessories- Globe also sells accessories to their

customers in stores. Accessories such as speakers,
earphones, storage devices, laptops, tablets,
phone cases, and etc. This is so the customers
need not to look far to accessorize their newly
acquired gadgets.

 Entertainment Packs- these packs aim to provide

Customers with cheap packages that already
incorporate the newest paid apps with the least
cost possible for them. It encourages customers
to choose Globe and also promote these certain
Apps to the Filipinos.

 Apparel- A person’s choice of clothes can speak a

lot about their personality. So it's important to own
outfits that are not just comfortable but also stylish
and sleek.

7
II. COMPANY OVERVIEW

Subsidiaries, Joint Ventures , and Associates (Globe Telecommunications Inc., 2017)

8
III. MARKETING STRATEGY

SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) of Globe

STRENGTHS

 a platform that will cater to the increasing demand for the mobile and

telecommunications industry

 lock-in programs to increase network loyalty

 constant drive to provide for better and faster networks to the consumers

 improve cell sites networks particularly in the provinces away from the capital

 create post-paid programs that can cater to all the segments targeted by Globe

 make post-paid transactions hassle free

 profitability of the company in terms of the increase in demand for internet and

cell-service providers

WEAKNESSES

 slow connection throughout the county, this in turn prompts consumers to post

their negative feedback online which harms the company’s name in the long run

 rude costumer service representatives that turn off possible consumers and current

consumers in switching to another brand

 late adaption to the newest technology developed in other countries

 expensive costs for data and other services provided

 emergence of international companies in the telecom scene in the country

OPPORTUNITIES

 the frequency of new acquisitions, joint ventures, and mergers across companies

 the possibility of world-wide expansion

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III. MARKETING STRATEGY

 increase of demand of internet providers due to the increase in demand of data

users

 welcoming of new investors from other countries

THREATS

 threats on cybersecurity from hackers who latch unto the system to take valuable

information from the customers

 complaints against Globe submitted to the National Telecommunications

Committee

 Expansion of other international telecommunications giants in the country, like

the proposed expansion of Telstra in the country

 Intense competition within the industry, as well as the rapid pace of innovation

from competitors

Competitive Profile Matrix

According to the most recent Company Profile Matrix, PLDT beats Globe in
Revenues and Internet Speed. These two are correlated as those that provide faster
internet attract more potential consumers. This is one thing Globe must focus on, as the
slower the connection is, the less people will want to open an account in the company.
Globe also an advantage over PLDT because of it’s prepaid lines available in the market.

10
III. MARKETING STRATEGY

PLDT has yet to provide for cellphone alternatives to its users, which provide Globe with
a bigger market for the prepaid industry.
In order to widely reach the consumers, companies are becoming more creative in
determining how to promote their products, ideas and services. This can be done in either
advertising or public relations or even both. Nowadays, certain companies do not just rely
on advertisements to sell their products but have dabbled in more evolutionary ways of
attracting customers. A part of Globe’s marketing strategy is it’s immediate response to
new product releases from cellular phone companies like Apple, Samsung, and any of the
like. An example of this is seen in the new release of the iPhone X this past month,
Globe immediately opened it’s lines to pre-orders of the new phone under the premise of
a two-year plan of exclusivity in the company. This attracts consumers who wish to avail
of the new iPhone without the burden of paying for the lump sum on the spot. Globe also
provides for different payment plans that caters to the different needs/wants of its
customers.
Apart from the provision of the newest cellphones in the market, Globe also
provides an array of services for those who opt to choose the prepaid life. It caters to this
side of the spectrum by providing quite a number of promotions that are budget-friendly
but still offers a lot of what is guaranteed to attract consumers. Promotions like unlicalls,
unlitexts, unli-internet, etc, for a price lower than that which postpaid consumers are
paying.

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IV. QUANTITATIVE ANALYSIS- FINANCIAL RATIOS

2014 2015 2016 2017 2018

GROSS PROFIT MARGIN 81.5 80.4 82.6 80.9 88.33

OPERATING PROFIT 18.8 19.6 17.4 11.3 22.95

MARGIN
NET PROFIT MARGIN 12.68 13.29 12.15 7.93 11.77

RETURN ON ASSET 7.73 8.5 6.88 4.91 6.26

RETURN ON INVESTMENT 11.35 12.68 11.64 6.27 9.8

RETURN ON EQUITY 27.22 27.99 24.96 14.41 25.06

EARNINGS PER SHARE 100.36 115.45 120.5 51.38 109.22

DIVIDENDS PER SHARE 75 83 88 65

CURRENT RATIO 0.77 0.72 0.64 0.74 0.74

QUICK RATIO 0.57 0.52 0.43 0.41 0.41

A/R TURNOVER 5.67 5.91 4.75 3.85 3.85

DAYS SALES OUTSTANDING 58.45 60.54 70.7 46.92 46.92

INVENTORY TURNOVER 5.67 5.91 4.75 3.85 3.85

FIXED ASSET TURNOVER 0.91 0.97 0.93 0.86 0.86

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IV. QUANTITATIVE ANALYSIS- FINANCIAL RATIOS ANALYSIS

WORKING CAPITAL TRNVR 2.29 2.55 2.38 2.11 2.11

NUMBER OF DAYS INVNTRY 64.35 61.78 76.85 94.77 94.77

NUMBER OF DAYS PAYABLE 831.79 783.6 923.34 1254.4 1254.44

2 4
DEBT TO ASSETS RATIO 69.62 70% 75% 74.6 74.6

LONGTERM DEBT TO ASSET 33.2 32.97 38.23 34.57 34.57

DEBT TO EQUITY RATIO 1.08 1.08 1.5 1.08 1.08

FINANCIAL LEVERAGE 3.29 3.29 3.94 3.17 3.17

INTEREST COVERAGE 3.11 3.36 3.63 3.22 3.22

RATIO

ASSET TURNOVER 0.61 0.64 0.57 0.62 0.62

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IV. QUANTITATIVE ANALYSIS – FINANCIAL STATEMENTS

A. Profitability Analysis
The Gross Profit Margin is used to measure the financial health of the company
by the money left after the deduction of Cost of Goods sold. This means to inform the
company’s managers if the current cost of the products sold by the company is
sustainable against its current selling price in the market. A high gross profit margin is
one of the best indicators that a company is in good financial health. The increase in
Globe’s GPM for 2016 indicates that either the cost of goods sold decreased or the total
revenue increased— both good indicators for the company, though it can be noticed that
there has not been a straight trend of an increase/decrease in the past 6 years. With high
gross margins, this often means that the Company has money to invest in new equipment,
renovations, research and development, or paying for current or long-term debt. This
means to inform the company’s managers if the current cost of the products sold is still
sufficient enough to cover for all expenses incurred, especially the administrative
expenses needed to bring the products to their current state.
Next, the Operating Profit Margin is used to determine what proportion of a
company's revenue is left over after paying for variable costs of production such as
wages, raw materials, etc.. Operating margin’s primary function is the ability to gauge
how efficiently a company is operating, or how profitable it is. This means to tell the
investors of the company how well the company is performing against the past years. The
increase in Globe’s Operating Profit Margin from 2015-2016 indicates that there was an
increase in sales and a decrease in expenses.
The Net Profit margin reveals the amount of profit that a business can extract
from its total sales. A high net profit margin indicates that a business is pricing its
products correctly and is exercising good cost control. The drop in the NPM of Globe is
also in line with the drop in the NPM of all other telecommunications company in the
country. The credit watchdog said in a statement last October 25, 2016 that the
combination of high capital spending and falling profitability would weigh on the outlook
for both PLDT Inc. and Globe Telecom. (Camus, 2016) As expected, a higher Net Profit
Margin will surely attract more investors to invest in Globe, as the number one goal of
every stockholder and company is to generate profit. The increase in the Net Profit
Margin would mean that the company is able to compensate for the Cost of Goods sold

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IV. QUANTITATIVE ANALYSIS – FINANCIAL STATEMENTS

against the sales price of the products sold. This increase in profitability would mean
increase in the overall net income of the company, and will yield a higher dividends rate
at the end of the year if the trend continues.
The Return on Asset is the profit of the company in relation to all its assets. ROA
gives an idea as to how efficient management is at using its assets to generate earnings.
Assets that sit out too long are not being maximized and are depreciating every day, that
are not used can tell the shareholders that the management is not maximizing their
investments, which is their biggest mandate. The decrease of the Return on Asset from
2015 to 2016 could be because of the 120 cell sites being built across the Philippines to
provide better services to the archipelago. These on going sites are already considered
part of the assets of the company but are still undergoing construction, therefore are
unable to be used by the company during the year. This results to them not being utilized
by the company, in turn causing the decrease of the ROA for 2016.

Return on Equity Chart

30

20
Globe
10 PLDT

0
2013 2014 2015 2016

The Return on Equity is the profitability of the company in relation to the book
value of shareholder’s equity. It is more than a measure of profit; it's a measure of
efficiency. This tells the investor how much the company makes with the money they
have invested in it. It shows whether management is growing the company's value at an
acceptable rate. This is also used to compare the Return on Equities between companies
in the same industry. PLDT, Globe’s biggest competitor, recorded a Return on Equity of
18.81 on 2016, a 7.79% decrease from 2015, whilst Globe recorded a 24.96% ROE, a
3.03 decrease on 2016. Granted that PLDT is relatively a bigger company than Globe, it
is still apparent that the telecommunication companies in the PH really suffered a
significant decrease in their returns for the past year. This is not an isolated case, as the

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IV. QUANTITATIVE ANALYSIS – FINANCIAL STATEMENTS

market has been on the lookout for better connections and have been complaining about
the lack of innovation within the communications industry. The usual way investors will
see shareholder equity displayed is as "book value" -- the amount of shareholder equity
per share, or the accounting book value of the business beyond its market value or
intrinsic economic value. A business that creates a lot of shareholder equity is a sound
investment, because the original investors will be repaid with the proceeds that come
from the business operations.
Return on investment (ROI) measures the gain or loss generated on an
investment relative to the amount of money the investor invested. ROI is expressed as
a percentage and is normally used for personal financial decisions, to compare a
company's profitability. Investors, can also use the ROI to assess a company's use of
resources and financial strength. Globe’s Return on Investment for 2016 decreased by
9.8%, whilst PLDT suffered an 8.1% decrease for the year as well. Both companies have
been pushing and looking for ways to improve sales by improving their services rendered
to the Filipino people and have, along the way, incurred more costs and perhaps this is
why both companies’ ROI have decrease a significant percent.
The interest coverage ratio is used to determine how easily a company can pay
their interest expenses on outstanding debt. The lower the interest coverage ratio, the
higher the company's debt burden and the greater the possibility of bankruptcy or default.
A lower ICR means less earnings are available to meet interest payments and that the
business is more vulnerable to increases in interest rates. Since Globe’s Income Coverage
Ratio has had an increasing trend for the past 3 years, this means that more earnings are
available to meet payments for interests and taxes when the period comes that they need
to be paid off. This is a positive for the company because it means that the company’s
income is growing, enough to cover the also growing interests and taxes that are imposed
upon it. This is important for investors because investors want to know If the company
there are eyeing are growing and using their investments for sustaining growth and
earning more profit, and the Interest Coverage Ratio is one indirect way of checking this.

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IV. QUANTITATIVE ANALYSIS – FINANCIAL STATEMENTS

B. Liquidity and Solvency Analysis

The current ratio is mainly used to give an idea of the company's ability to pay
back its liabilities (debt and accounts payable) with its assets (cash, marketable securities,
inventory, accounts receivable). As such, current ratio can be used to take a rough
measurement of a company’s financial health. The higher the current ratio, the more
capable the company is of paying its obligations, as it has a larger proportion of asset
value relative to the value of its liabilities. The decrease in Globe’s Current Ratio could
be the result of the 120 cell sites undergoing construction in 2016. The constructions
would have been transferred to long-term assets, whilst using current assets, which
caused the assets to decrease, which in turn caused the ratio to decrease. Comparing
Globe’s Current Ratio to PLDT’s Current Ratio will not yield anything of importance
because both companies differ in operations, thus will differ in the Current Ratios as well.
Financial leverage, or debt to equity ratio, refers to the use of debt to acquire
additional assets. This is used to give investors, managers, and all the users of financial
statements what part of the additional assets acquired in the year was financed by debt.
Leverage is employed to avoid using too much equity to fund operations. An excessive
amount of financial leverage increases the risk of failure, since it becomes more difficult
to repay debt. A company who grows its assets by use of debt is in trouble because these
debts will, sooner or later, need to be paid and without the sufficient financial backing to
actually pay for these debts, the company will be forced to liquidate assets or, in the
worst case scenario, file for bankruptcy. In Globe’s books for 2016, in the company’s
PHP 249, 863, 000 worth of assets, about 3% was financed by debt. This is important for
investors because it is a given that when majority of a company’s assets are already being
financed by debt, this means that the company is in financial trouble. When a company
can no longer finance acquisition of assets by their own money, this means that the
company is sustaining losses after losses and is no longer capable of paying for new
assets, which would also imply that when the maturity date of all the debts acquired for
these new assets are to come, the company will not have any extra money to pay the
debts off of. This is crucial to investors because some companies resort to lying and
manipulating their financial statements to encourage investors to invest, so that the
company can gain money to make profit that they can use to pay off for these debts. This

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IV. QUANTITATIVE ANALYSIS – FINANCIAL STATEMENTS

will be unfair to the investor as they subjected to falsified documents to encourage them
to invest in the company.

C. Efficiency Analysis
A company management’s most important mandate is wealth maximization.
Yes, a company may be increasing in net profit, but have the assets and investments been
maximized to their fullest extent? This is the question the efficiency analysis answers.
Globe’s efficiency ratios inform the investors and those who are eyeing the company as a
potential investment, how the company is maximizing the assets while also producing the
same quality products. The act of maximizing assets and minimizing costs while still
maintaining a standard of excellence will always reflect on customer’s satisfaction.
Admittedly, Globe’s efficiency ratios have shown a decline from 2015 to 2016, but the
past years (2011, 2012, 2013, and 2014) have been on an increasing trend. In 2016,
Globe’s Accounts Receivable turnover decreased by 11.5%, and Asset turnover by 7%.
Since Globe has lock-in subscriptions, this decrease in turnovers can be also be attributed
to the two years that a consumer is locked in to the company with the same phone. Since
phones are one of Globe’s biggest inventory items, it is expected that turnover will really
be slow, especially now that phones are being built to last and are bought according to
durability. With lock-in periods, it’s not even a guarantee that even after the contract of 2
years is finished that the customer will come back to repurchase another phone. Some opt
to renew the plan without the phone and continue using the phone that they acquired in
the first run. Phones are also not easily replaceable, as they can be quite costly, which is
why not every consumer is going to change every now and then. Most of Globe’s
services come from providing cell-service networks as well, which does not appear on the
overall inventory of the company.

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IV. QUANTITATIVE ANALYSIS – COMMON SIZE ANALYSIS

BALANCE SHEET 2016 2015 2014 2013 2012 2011

COMMON SIZE
ANALYSIS
ASSETS 100.00 100.00 100.00 100.00 100.00 100.00
% % % % % %
Current Assets
Total Cash and Cash 3.46% 6.04% 9.33% 4.66% 4.57% 3.97%
Equivalents
Receivables 10.78% 11.21% 9.95% 9.56% 8.18% 7.78%
Inventories and Supplies 1.83% 2.29% 1.78% 2.23% 1.40% 1.47%
Derivative Assets 0.03% 0.31% 0.00% 0.00% 0.00% 0.01%
Prepayments and other 5.12% 4.21% 4.97% 5.95% 8.32% 4.30%
Current Assets
Total Current Assets 21.22% 24.04% 26.04% 22.40% 22.99% 18.12%
Noncurrent Assets
Property and Equipment 56.93% 65.94% 65.37% 69.41% 68.52% 76.32%
Intangible Assets and 5.96% 6.67% 3.16% 2.41% 2.68% 0.15%
Goodwill
Investments 13.68% 0.77% 0.25% 0.10% 0.12% 0.19%
Deffered Income Tax 1.05% 0.68% 1.06% 1.20% 0.69% 0.66%
Assets
Derivative Assets 0.30% 0.25% 0.32% 0.35% - -
Other Noncurrent Assets 0.88% 1.64% 3.86% 4.12% 5.11% 1.80%
Total Noncurrent Assets 78.78% 75.94% 73.96% 77.60% 77.01% 81.88%

2016 2015 2014 2013 2012 2011

LIABILITIES AND 100.00 100.00 100.00 100.00 100.00 100.00
OWNER'S EQUITY % % % % % %

LIABILITIES 74.60% 69.65% 69.62% 73.82% 69.13% 63.41%

Current Liabilities
Accounts Payable and 23.67% 25.46% 26.48% 24.82% 20.09% 17.72%
Accrued Expenses
Notes payable 1.80% - - 3.28% 1.39% 1.35%
Current Portion of Long- 2.33% 4.07% 3.41% 3.76% 6.28% 7.38%
Term debt

19
IV. QUANTITATIVE ANALYSIS – COMMON SIZE ANALYSIS

Unearned Revenues 2.04% 2.52% 2.57% 1.73% 1.69% 1.90%

Income Tax Payable 0.44% 0.78% 0.88% 0.65% 0.91% 0.89%
Provisions 2.65% 0.59% 0.22% 0.14% 0.16% 0.16%
Derivative Liabilities 0.04% 0.06% 0.02% 0.19% 0.14% 0.13%
Total Current Liabilities 32.98% 33.49% 33.62% 34.57% 30.65% 29.53%
Noncurrent Liabilities
Longterm Debt- Net 38.18% 32.84% 32.95% 36.52% 34.07% 28.70%
Deffered Income Tax 0.77% 0.00% 0.00% - 1.53% 2.82%
Other Long Term 2.67% 3.32% 3.05% 2.73% 2.55% 1.88%
Liabilities
Total Noncurrent 41.62% 36.16% 36.00% 39.26% 38.16% 33.44%
Liabilities

Common Size Balance Sheet- ASSETS

90
80
70
60
50
Current Assets
40
Noncurrent Assets
30
20
10
0
2011 2012 2013 2014 2015 2016

Common Size Balance Sheet- Liabilities

45
40
35
30
25
Current Liabilities
20
Noncurrent Liabilities
15
10
5
0
2011 2012 2013 2014 2015 2016

20
IV. QUANTITATIVE ANALYSIS – COMMON SIZE ANALYSIS

STOCKHOLDER'S 25.40% 30.35% 30.38% 26.18% 30.87% 36.59%

EQUITY

Paid-up Capital 17.81% 22.73% 24.78% 21.63% 23.04% 26.12%

Cost of share-based 0.23% 0.17% 0.11% 0.16% 32.00% 0.44%

Payments
Other Reserves -0.43% -0.62% -0.54% -0.46% -0.36% -0.31%

Retained Earnings 7.77% 8.06% 6.05% 4.85% 7.87% 10.34%

Non-controlling Interest 0.01% 0.00% 0.00% - - -

Total Equity 25.40% 30.35% 30.38% 26.18% 30.87% 36.59%

Common Size Balance Sheet- Equity

40
35
30
25
20
Total Equity
15
10
5
§ 0
2011 2012 2013 2014 2015 2016

21
IV. QUANTITATIVE ANALYSIS – COMMON SIZE ANALYSIS

According to the common size analysis of Globe’s assets for the years 2011,
2012, 2013, 2014, 2015, and 2016, it can be noticed that there has been a significant
downward trend for the company’s total cash and cash equivalents, Receivables, and
Inventories and Supplies for the current assets whilst in the noncurrent, it was both
Property and Equipment and Intangible Assets and Goodwill that decreased. In terms of
the decrease of cash and cash equivalents, this can be attributed to the increase in the
Investments of the company, which saw a 12.91% increase from 2015 to 2016. Perhaps
the company saw that there was an abundance of cash and cash equivalents on hand that
they could afford to invest their company to subsidiaries or associates. This was a smart
move on Globe’s part as the money will continue to grow, compared to keeping it and it
being idle for the time it is unused.
For the decrease in the Property, Plant and Equipment of the company, it can be
granted that the company’s current cell sites, machines, towers, and etc, have depreciated
over the years over continued usage. Globe’s Return on Asset ratio also decreased by a
2% mark over the past year, which means that compared to 2015, Globe’s asset was not
maximized to garner the highest point of possible profit. The most significant increase in
Globe’s assets for the year can be seen in the growth of the company’s investments.
Globe Telecom to invest close to $500 M to expand corporate data network for
enterprises. This move was to continue Globe’s aim to provide the best to its consumers
in the Philippines. This was also to establish the company as a digital nation in the entire
country.
For the company’s liabilities most noticeable increasing trends, debatably
considered a negative, can be seen in the noncurrent liabilities of the company. Longterm
Debt- Net and Deffered Income Tax can both be seen increasing in term of expenses for
the company. This would mean that the company has acquired assets and/or accruals that
will only be due after a year or more. This can be attributed to accruals of properties,
plants, equipments, bonds from other companies, and etc. Since Globe’s Longterm Debt
to Asset ratio increased by 8% for the year, from 54% to 62%, this would mean that the
company’s ability to liquidate assets for the payment of these longterm liabilities also
increased by 8%. The company’s provisions for expenses also increased by 2.06% for
2016, from 0.59 to 2.65%. Increase in a company’s liabilities is not necessarily an instant

22
IV. QUANTITATIVE ANALYSIS – COMMON SIZE ANALYSIS

bad omen of the company current financial stability, as there is no business that operates
without a debt or other forms of payables. Some businesses opt to finance some of the
recent acquisitions through debt because it gives them the choice to keep the current
liquidated money on hand in case of other arising expenses, whilst also setting aside
enough to cover maturing obligations. This is useful for investors because it gives them a
glimpse on how efficiently a business is being run. When the liabilities outnumber the
assets, it tell the investors that the managers are not managing the company well, as they
are accruing more payables than they can cope with, and this can prove disastrous to the
company in the long run.
According to the common size analysis for the company’s total stockholder’s
equity, there was a decrease of 4.95% in the total stockholder’s equity for the year 2015-
2016. This could have been the result of the payment of stock dividends, which grew to
Php 22 in 2016 from Php 20.75 in 2015. A corporation's earnings that have accumulated
over time are included in shareholders' equity as retained earnings. Since cash dividends
are the payouts of a corporation's income to its common and preferred shareholders, they
result in a reduction to shareholders' equity.

23
IV. QUANTITATIVE ANALYSIS – COMMON SIZE ANALYSIS

Globe Telecom Common Size Analysis- INCOME 2016 2015 2014 2013 2012 2011
STATEMENT
Revenue 100% 100% 100% 100.00% 100.00% 100.00%

Cost of Revenue 17.07% 18.90% 18.49% 20.22% 19.13% 19.43%

Gross Profit 82.93% 81.10% 81.51% 79.78% 80.87% 80.57%

Sales, General, and Administrative 49.57% 49.80% 49.18% 49.16% 48.07% 44.79%

Depreciation and Amortization 22.79% 21.58% 21.54% 36.20% 33.74% 28.84%

Financing Cost 3.91% 3.44% 3.05% 3.84% 3.81% 3.82%

Impairment Losses 3.13% 3.18% 4.42% 3.27% 2.67% 2.92%

Total Operating Expenses 65.85% 63.67% 63.73% 73.78% 71.39% 64.75%

Operating Income 17.07% 17.43% 17.78% 6.01% 9.48% 15.82%

Other Income (Expense) 0.82% 0.16% 0.27% 0.11% 0.12% 0.04%

Income before Tax 17.39% 19.56% 18.78% 7.22% 11.28% 17.25%

Provision for Income Tax 5.78% 7.18% 7.14% 2.51% 4.16% 6.48%

Net Income 12.59% 13.74% 12.95% 5.21% 7.19% 10.31%

24
V. QUANTITATIVE ANALYSIS- COMMON SIZE ANALYSIS

Common Size Income Statement

15

10

Net Income
5

0
2011 2012 2013 2014 2015 2016

The cost of goods sold percentage decreased from 18.9% in 2015 to

17.07% in 2016. This decrease could reflect decreases in the prices of raw materials,
increased demand for its products (allowing an increase in selling prices) or efficiencies
in the manufacturing process. These factors are a win for the company since the lesser the
cost of the needed goods to be sold, the more profit, in theory, a company receives.
The exhibit also shows that net income decreased 12.59% between 2015
and 2016. A decrease in net sales is often a cause of major concern. A sales decline could
reflect a decrease in sales activity (number of units sold) or a decrease in unit selling
prices. Either of these causes could have adverse effects on profitability. The Common
Size Analysis also shows a 2.18% increase in the Total Operating Expenses of Globe
which was 65.85% in 2016 from 63.67% in 2015.
From the common size analysis, it can be taken as a good sign that
Globe’s total cost of goods sold is only 17% of the total revenue earned by the company
for the year. This means that the prices these goods are sold at, are sufficient enough to
cover the expenses incurred by the company and still have additional to be able to acquire
new assets like the 120 cell sites built all around the archipelago, or the ability to acquire
joint ventures with other companies. Most expenses incurred by the company for the year
also stayed in the same bandwidth as the other years, indicating that not much has
changed in the purchasing power of the business, or the way it utilizes its money for it’s
needs, but still generates a higher income for the company despite this.

25
V. QUALITATIVE ANALYSIS

Globe Telecom is a telecommunications company and a dynamic organization

that continues to work on delivering the best and personalized products and services to
customers and at the same time, bringing happiness to its employees and shareholders.
The Company’s products and services endlessly thrive and remain to enrich the lives of
its millions of subscribers.
Any company that's truly interested in customer satisfaction must first meet the
needs of its employees, and Globe offers the best environment for growth and
development in the skills and abilities of the employees. Creating a wonderful world is
what the company pursues to achieve. A wonderful world brings about enhancement of
what Globe has to offer its subscribers. The employees make this possible by providing
excellent services, allowing them to receive wonderful employee benefits in return. This
builds a service culture that will differentiate us in the market and enable us to become a
more trusted brand, ensuring our customers will keep coming back. In the end,
shareholders feel wonderful about the organizational performance as the company’s
mission, vision and values are greatly fulfilled.
Last January 29, 2016, Globe began to fund the construction on a network
infrastructure considered one of the highest in Asia. Globe also proposed Open Access
Law to Congress. This is a law that is a way to lessen bureaucratic red tape and other
political hurdles that stand in the way in the deployment of telecommunications and
broadband infra such as cell sites. Globe has also been advocating for the immediate
introduction and distribution of the 700 MHz of frequency to sufficiently provide for
rapidly increasing data traffic amid growing smartphone use in the country.
(Globe Telecommunications Inc., 2016)
A company is nothing without it’s loyal consumers. This train of thought
prompted Globe to participate in global move to protect netizens from online fraud and
scams. This move aims to help lessen the cases of customers being subjected to ill-
minded intentions of scammers and avoid being victims of fraud. As part of its
commitment to enable the shift to a digital nation and empower Filipinos around the
world to fully embrace their digital lifestyle, Globe Telecom joins a GSMA-led global
initiative to protect users from the growing number of fraudulent activities and scams in

26
V. QUALITATIVE ANALYSIS

the digital space. (Globe Telecommunications Inc., 2016) With this, Globe was able to
crack down on broadband fraudsters in Taguig and Quezon City last March 21, 2016. The
two suspects are believed to be engaged in a modus operandi that involves retrieval of
LTE modems from legitimate customers on pretext of an upgrade or repair— their arrest
was a major win for the company as it tells all other fraudsters that Globe is now serious
in the drive to counter the scammers in the black market of the country.
Last February 26, 2016, Globe Telecom was the lone PH telco recognized at
GSMA Mobile Connect Reception in Barcelona, Spain. The GSMA Mobile World
Congress is a combination of the world's largest exhibition for the mobile industry and a
conference featuring prominent executives representing mobile operators, device
manufacturers, technology providers, vendors and content owners from across the world.
(Wikipedia, 2016) With GSMA, Globe aims to secure a more private platform for the
consumers, to further the campaign on safe and secured connections within the country.
Also in February of 2016, Globe Telecom joins the Telecom Infra Project. This project
works with Facebook to drive Global Connectivity. Globe is working with industry
leaders to connect billions of people around the world through the use of innovative
technologies and operational methods. This is still in line with Globe’s aim to provide the
Philippines with the best possible services. (Globe Telecommunications Inc, 2016)
Globe Telecom also bagged a total of 3 nominations in the 19th Telecom
Asia Awards, as the Philippine telecommunications provider continues to offer
products and services that enhance its customers’ digital lifestyle. Globe was
nominated in the following categories: Best Emerging Market Operator, Most Innovative
Approach to Customer Experience and Most Innovative Approach to Analytics. Telecom
Asia Awards are Asia’s longest-running and most prestigious telecom industry
awards. They reward innovative and outstanding performance by Asian service
providers and industry executives. (Globe Telecommunications Inc., 2016)
In May of 2016, the company also bagged three citations from Finance Asia, a
leading publisher of financial news in the Asia Pacific region. The company was given
two major company awards and an individual category citation. The citations were based
on a survey conducted by Finance Asia involving investors on their views on which listed
companies around Asia they consider to be best managed, with the best senior executives.

27
V. QUALITATIVE ANALYSIS

(Globe Telecommunications Inc, 2016) In line with this, Frost & Sullivan’s Telecom
Service Provider of the Year Award was also awarded to the Globe Group.
Globe also announced the partial acquisition of San Miguel Corporation's
Telecommunications Business. The transaction is expected to provide benefits to mobile
internet customers, given the added services and better coverage that the additional sites,
particularly that of the 700MHz frequency, can provide. (Globe, 2016) In addition,
Globe’s acquisition of the Philippines’ 1st 700 MHz cell site generates speeds ranging
60-100 Mbps. On a roll, Globe also fires up 130 sites using the 2600 MHz spectrum in
Visayas and Mindanao.
When Super Typhoon Lawin hit the Philippines, Globe extended its hand
to help the victims by providing them with free texts and call services. Globe gave active
TM customers in Cagayan Province, Kalinga, Apayao, Isabela, Ilocos Norte, Batanes,
Aurora, and Abra free Unli Intra SMS + 50 AllNet SMS + 10 Minutes Call to TM/GP
valid for 1 day, while active Globe prepaid customers in the said provinces were provided
with free Unli AllNet SMS + 10 Minutes Call to GP/TM valid for 1 day to assist with
their communication needs. (Globe Telecommunications Inc., 2016)
In the later part 0f 2016, Globe Telecom bagged the Platinum Award for
Excellence in Governance, Corporate Social Responsibility, and Investor Relations
Benchmarking from The Asset, an integrated multi-media company serving the elite
community of leading corporate and financial decision makers in Asia. (Globe
Telecommunications Inc., 2016)
What makes Globe so great is the heart for its employees and
consumers, and the constant drive to improve services by reaching far and wide for
new technology— all for the betterment of the Company and the Filipino People.

28
VI. SUMMARY ANALYSIS

Globe Telecom, Inc. is the number one mobile brand in the Philippines and the
spearheads of the Filipino digital lifestyle. The company provides cellular, broadband and
mobile data services by focusing on improving the services they are able to provide to
consumers by always being on the lookout for advancements in technologies across the
world that they can bring to the Philippines to keep the country’s services at par with
those in the international scene.
The world at your fingertips through Globe Telecom investments is the dream and
the current run of the company in the market is the way. Invest in Globe and the future of
the Philippine Telecommunications Industry will be in our hands. Hand in hand, we will
provide the best we can offer to the Filipinos here and worldwide.
The decrease in the total current assets of the company is not necessarily a
negative omen. In terms of the decrease of cash and cash equivalents, this can be
attributed to the increase in the Investments of the company. Perhaps the company saw
that there was an abundance of cash and cash equivalents on hand that they could afford
to invest their company to subsidiaries or associates. This was a smart move on Globe’s
part as the money will continue to grow, compared to keeping it and it being idle for the
time it is unused. The increase in total noncurrent liabilities also tells us that though the
current assets have decreased, the company invested in more long term assets such as the
130 cell sites being built and other equipment acquired in the year that passed.
Though the company’s competition with PLDT has been dubbed the David and
Goliath battle between Telcos in the industry, PLDT has long been struggling with
benign growth, compared to Globe Telecom, due in part to its late entry into the digital
world. In terms of growth, Globe Telecom surpasses PLDT. PLDT opts to start up
businesses whilst Globe opts to partner/associate with established small companies and
better it by taking it under its wing.
In 2016 alone, Globe has won numerous awards in the Telecommunications
Industry across Asia. This is in comparison to its partisan competitors in the Philippines.
Globe continues to dominate the postpaid scene, always first in new releases of phones
and always quick to provide consumers with the best possible plans in the lowest possible
prices. This attracts more consumers to contract with Globe, and these contracts promote
loyalty to the brand, which serves as Globe’s best advertising strategy. These awards are

29
VI. SUMMARY ANALYSIS

a foretelling of how well the company is being run on the inside that even those outside
the company, and outside the scope of the services of Globe, are able to notice the run the
company is taking. This aims to satisfy and prove to current investors and potential
investors that in Globe, their investments are in good hands.
Globe also provided a 9.4% increase in the dividend yield of the company for
2016. This increase, from PHP 20.75 to PHP 22, tells stockholders that their investments
are growing within the company. The company’s overall performance trend has been
growing, slowly but steadily in the past six years, as shown in the common size analysis
of the company’s balance sheet and income statement. Stability is one of a company’s
greatest qualities, and Globe Telecommunictions Inc. is stable and in an upward spiral
towards becoming the Philippines number one telecommunications company.

30
VII. RECOMMENDATION AND CONCLUSION

In businesses, there will always be years winning years and losing years. Globe
has been established for 89 years now, and even then, the company is not an exception to
this fact. In the past years, many small telecom companies have popped up here and
there, and this competition has certainly affected Globe’s sales and revenues. As the
researchers are also proud Globe users, a few recommendations for the betterment of the
services rendered by the company to their consumers are the following: Provide better
screening and training for the front-liners in the physical stores of the company.
Consumers tend to stick with first impressions of companies when they are met with
untrained and irresponsible responders in their query. For the company to invest in better
technology that would be head-to-head with those in the international
telecommunications companies around the world would also be of help. In 2016, when it
was rumoured that Telstra, a telecom company from Australia, was to partner with San
Miguel Group to put up another giant in the telecommunications industry in the PH, there
was a buzz amongst the consumers. This tells the researchers that many consumers are
clamouring for better services and faster data and internet from these providers like
Globe and PLDT. Though this is the case, Globe has still proven that though the overall
services rendered in the PH are a long way from those in other countries, customers are
still choosing Globe, thus the overall increase in Globe users from 56.2 million
subscribers in 2015 to 62.8 million in 2016. This increase in subscriber count indicates
that more and more Filipinos are choosing Globe. This increase and the other corporate
decisions made by the competent board of directors of the company led to the 9.2% of
dividend yield per common stock in the year 2016. This is not counting the 9% increase
of said dividend yield from 2014 to 2015, etc. If this trend continues, Globe is foreseeing
another 9% increase for the year 2017, which would be from PHP 22 in 2016 to PHP
23.98 in the end of 2017. This gives potential investors a glimpse of how much their
investments will grow within Globe Telecom— which is why Globe is worth investing
in.
Sabay natin aabutin ang mundo dito sa Globe.

31
VIII. BIBLIOGRAPHY

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Kokemuller, N. (n.d.). What Happens When the Gross Profit Margin Is High? . Retrieved
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c.html#sthash.HXF2roBX.dpbs
Globe Telecommunications Inc. (2016, Febuary 9). Newsroom. Retrieved September 30,
2017, from Globe.com.ph: http://newsroom.globe.com.ph/press-release/corporate/2016-
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FINANCIAL STATEMENTS

34
FINANCIAL STATEMENTS

35
FINANCIAL STATEMENTS

36
FINANCIAL STATEMENTS

37
FINANCIAL STATEMENTS

38
VIII. BIBLIOGRAPHY

39