Globe Telecom Inc. said it widened the range of prior year’s core net income that it could declare as dividend to shareholders, signaling a significant reduction in capital expenditure spending in the coming years.
The listed telecommunications and financial technology firm of the Ayala Group said it revised its dividend policy to raise the maximum level to 90 percent of prior year’s core net profit from 75 percent but kept the minimum at 60 percent.
For the first quarter, Globe declared a P25 a share cash dividend for shareholders on record Feb. 21.
Ricardo Puig, research head at Wealth Securities, said the dividend policy revision is a clear indication of greater spending flexibility on the part of Globe. With the shift in dividend policy, Puig noted that buying stocks of Globe is again a dividend play rather than a growth play.
“This change in dividend policy is made possible by greater cash flexibility arising from declining capital expenditure requirement. Most telecommunications companies have completed hyper-growth phase in capex spending spurred by pressure from the government and by the private sector due to hybrid working arrangements cause by the COVID-19 pandemic,” he said.
Globe spent P70.6 billion last year for capital expenditures, down 30 percent from 2022 and expected to decline further to P55 billion this year. Capex peaked at P101 billion in 2021, which 91 percent going to data infrastructure.
It noted that purchase order issuances last year was down to less than half of actual capex, setting the stage for Globe to return to positive free cash flow.
Puig also noted the need to shell out funds to build new and maintain telecommunications towers has almost disappeared with the emergence on telco tower companies. In fact, Globe has completed last year the sale of 4,467 out of its total 7,506 towers.
On Thursday, Globe said it completed on Feb. 7 the sale of 100 towers to PhilTower for around P1.5 billion. Globe had earlier agreed to sell to–then lease back from—PhilTower a total 1,350 towers. With the deal Wednesday, Globe has closed the sale of 910 of these telecom infrastructures.
Meantime, Globe posted 3 percent growth in service revenue to PHP162.33 billion last year but net income was down 29 percent to P24.58 billion due largely to elevated capex.
