Globe Telecom has announced a recalibration of its cash capital expenditure (Capex) for the current year.
The telecommunications company invested PHP70.6 billion in cash Capex for 2023, marking a 30 percent reduction compared to the previous year. This scaled-back spending underscores Globe Telecom’s dedication to capital efficiency and network optimization following significant investments in prior years.
For 2024, Globe Telecom is targeting a further reduction in cash Capex, setting full-year guidance at $1 billion, down from $1.3 billion in 2023. These investments are anticipated to decrease even further by 2025, falling below $1 billion as part of Globe’s strategy to align Capex-to-revenue levels with those of its regional counterparts.
The company’s Capex-to-revenue ratio has significantly decreased from 64 percent in 2022 to 44 percent in 2023, highlighting its proactive approach to maximizing network investments and prioritizing capital efficiency. Capex spending for 2024 is projected to represent approximately 30 to 35 percent of total gross service revenues, with further reductions anticipated in the following year.
A substantial portion of Globe’s 2023 Capex was allocated to enhancing the data infrastructure to deliver enhanced digital experiences amid increasing demand for data connectivity.
With significant investments made over the past three years, Globe is now reaping the rewards of an expanded network. The company’s investments during this period enabled it to lower purchase order (PO) issuances in 2023 without compromising network quality.
Total PO issuances in 2023 amounted to $600 million, less than half of the actual Capex spend for the year and approximately 36 percent of the average annual PO issuances from 2018 to 2022. This deliberate effort to reduce PO issuances serves as a leading indicator of Globe’s future Capex payment levels and plays a key role in its objective to achieve positive free cash flow by 2025.
Rizza Maniego-Eala, Globe Telecom’s Chief Finance Officer, has outlined the company’s objectives for 2024, emphasizing the focus on optimizing network utilization to drive low to middle single-digit topline growth and maintain a 50 percent EBITDA margin for the year. Financing for cash Capex spending will be sourced from internally generated cash flows, debt financing, and proceeds from tower sales, expected to be completed by the first half of 2024.
Baburajan Kizhakedath