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Globe spends money more for capex than it can generate from operations

In the first quarter of the 2021 Globe Telecom (GLO) spent 19.1 billion Pesos for capital projects. The amount spent for capital projects was more than the cash it generated from operating activities during that period. GLO generated cash from operating activities of only 16.7 billion Pesos in the first quarter of 2021. Of that 16.7 billion Pesos from operations, 4.4 billion Pesos may have come from delayed supplier payments as accounts payable rose to 60.8 billion Pesos from 56.4 billion Pesos at year’s end 2020.

GLO will have to aggressively spend on its network and infrastructure as competition heats up. In 2020 revenue declined by 6.1 billion Pesos while revenue of its main rival increased by 11.8 billion Pesos. Technological superiority of its main rival over GLO’s network and infrastructure may have been the reason for GLO’s underperformance when competition has outperformed.

The resources required to improve its network and infrastructure may have to eat cash distribution to shareholders. Distribution to shareholders have already decline in 2021 as compared to that of in 2020.

As shown in the first quarter, GLO was able to fund the 19.1 billion capital expenditure with long-term loan of only 10 billion Pesos with the rest coming from cash generated from operations. GLO has to dipped from its existing cash to make distributions to shareholders. Cash decreased by 5 Billion Pesos at the end of first quarter of 2021.

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