Globe Seeks to Ally With Lopez's ABS-CBN to Tap Content

Globe Telecom Inc. (GLO) may collaborate with Lopez Holdings Corp. (LPZ)’s broadcasting unit ABS-CBN Corp. (ABS) as the Philippines’ second-largest mobile-phone company seeks to add media content to boost wireless usage by its subscribers.

Globe and Lopez are in talks to cooperate and maximize profit, President Ernest Cu said in an interview at his office in Manila on Nov. 9. “We’re looking at other avenues to partner” including Globe’s plans to seek control of Lopez unit Bayan Telecommunications Inc., he said.

Globe joins bigger competitor Philippine Long Distance Telephone Co. (TEL) in seeking to add services and content to attract customers and boost network usage as intense competition and a shift to social media hurt mobile operators’ earnings. While Bayan’s spectrum will help Globe to increase users and extend broadband reach, ABS-CBN’s content could boost sales, Cu said.

“Mobile has become a widepsread platform of communication and one thinking that has taken root is that telephone companies can boost revenue from connectivity by securing exclusive content,” said James Lago, head of research at PCCI Securities Brokers Corp. in Manila. The deal with Bayan will give Globe assets to expand its networks, he said.

The venture of Singapore Telecommunications Ltd. (ST) and Ayala Corp. (AC) said on Nov. 6 it was offering to purchase debt of Bayan and a unit. The company is in talks with the owner of the smaller rival on a wide range of commercial arrangements, including a potential stake purchase, Globe said at the time.

Shares of Globe have declined 0.5 percent this year, compared with the Philippine benchmark stock index’s 25 percent advance. The stock fell 1.4 percent to 1,127 pesos at the close in Manila trading yesterday.

Profit Decline

Net income at the telecommunications carrier fell 26 percent to 1.84 billion pesos ($44.8 million) in the third quarter as expenses related to a $790-million network modernization program outpaced the growth in revenue, according to a company filing on Nov. 8.

Philippine mobile-phone companies have reported slowing profits in recent quarters as bucket-priced subscription plans triggered by intense competition hurt earnings, while the popularity of sites such as those of Facebook Inc. and Twitter Inc. prompted big investments in network upgrades.

PLDT Chairman Manuel Pangilinan said Nov. 6 that competitors were trying to “copy” its plans. PLDT will pursue its media strategy by building on its investments in TV 5, the nation’s third-largest television network, and in Cignal TV, a satellite television service, Pangilinan said last month after a retirement fund venture ended talks to buy a controlling stake in GMA Network Inc. (GMA7)

Execution Key

“The key to a successful convergence is not the strategy,” Cu said referring to Pangilinan’s comment. “The key is the execution.”

In addition to a possible alliance with ABS-CBN, Globe is exploring tie-ups with other media companies including Solar Entertainment Corp. and GMA Network, Cu said.

“We said that content is a very key ingredient to most of the telcos,” Cu said. “What the Philippine mobile-phone subscribers lack today on their mobile phones is access to local content. YouTube is the only local content.”

Globe’s mobile subscribers increased 10 percent to 32.1 million at the end of September, compared with PLDT’s 68.6 million. PLDT last year acquired Digital Telecommunications Philippines Inc. for as much as 74.1 billion pesos.

Cu said mobile-phone subscriptions at Globe may continue to grow at a single-digit percentage pace in the coming years.

Still, Filipino telecommunications providers’ strategy to counter slowing growth by adding media services may take time to boost sales, according to PCCI Securities’ Lago.

“Some telephone companies are moving toward this direction as earnings from connectivity are expected to decline moving forward,” Lago said. “The jury is still out if this direction for exclusive content is going to pay off.”

To contact the reporters on this story: Norman P. Aquino in Manila at naquino1@bloomberg.net; Cecilia Yap in Manila at cyap19@bloomberg.net

To contact the editor responsible for this story: Clarissa Batino at cbatino@bloomberg.net

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