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Unformatted text preview: SEC Number: 1177
File Number: ____ GLOBE TELECOM, INC.
27th Floor, The Globe Tower
32nd Street corner 7th Avenue,
Bonifacio Global City, Taguig 1634
(632) 797-2000 SEC Form 17-A
FOR THE FISCAL YEAR ENDED
31 DECEMBER 2018 TABLE OF CONTENTS
PART I – BUSINESS AND GENERAL INFORMATION .............................................................. 4
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4. BUSINESS ....................................................................................................................... 4
PROPERTIES ................................................................................................................. 31
LEGAL PROCEEDINGS.................................................................................................... 34
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........................................ 37 PART II – OPERATIONAL AND FINANCIAL INFORMATION ................................................. 38
ITEM 5. ISSUER’S EQUITY, MARKET PRICE, DIVIDENDS AND RELATED STOCKHOLDER MATTERS .... 38
ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS ......................................... 45
For The Financial Year Ended 2018.................................................................................... 45
For The Financial Year Ended 2017.................................................................................... 71
PART III – CONTROL AND COMPENSATION INFORMATION ............................................ 100
ITEM 7. DIRECTORS AND KEY OFFICERS .................................................................................. 100
ITEM 8. EXECUTIVE COMPENSATION ........................................................................................ 110
ITEM 9. SECURITY OWNERSHIP OF CERTAIN RECORD, BENEFICIAL OWNERS & MANAGEMENT..... 113
ITEM 10. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................. 114
PART IV – CORPORATE GOVERNANCE .............................................................................. 118
SIGNATURES .......................................................................................................................... 120
PART V – EXHIBITS AND SCHEDULES ................................................................................ 121
INDEX TO EXHIBITS ............................................................................................................... 122 PART I – BUSINESS AND GENERAL INFORMATION
Any reference in this report to “we”, “us”, “our”, “Company” means the Globe Group including its whollyowned subsidiaries and references to “Globe” mean Globe Telecom, Inc., the parent company, not
including its wholly-owned subsidiaries. Also, unless otherwise stated or the context indicates
otherwise, references to Board of Directors, committees, management, directors, officers and
stockholders are references to the Board of Directors, committees, management, directors, officers and
stockholders of Globe and references to the Bylaws, Articles of Incorporation or other documents are
references to the Bylaws, Articles of Incorporation or other documents of Globe.
Item 1. Business
Globe Telecom, Inc. is a major provider of telecommunications services in the Philippines, supported
by over 7,700 employees and over 1.2 million AutoloadMax (AMAX) retailers, distributors, suppliers,
and business partners nationwide. The Company operates one of the largest and most technologicallyadvanced mobile, fixed line and broadband networks in the country, providing reliable, superior
communications services to individual customers, small and medium-sized businesses, and corporate
and enterprise clients. Globe currently has 74.1 million mobile subscribers (including fully mobile
subscribers), 1.6 million home broadband customers, and close to 1.4 million landline subscribers.
Globe is one of the largest and most profitable companies in the country, and has been consistently
recognized both locally and internationally for its corporate governance practices. It is listed on the
Philippine Stock Exchange under the ticker symbol GLO and had a market capitalization of US$4.8
billion as of the end of December 2018.
The Company’s principal shareholders are Ayala Corporation and Singapore Telecom, both industry
leaders in their respective countries. Aside from providing financial support, this partnership has created
various synergies and has enabled the sharing of best practices in the areas of purchasing, technical
operations, and marketing, among others.
Globe is committed to being a responsible corporate citizen. Globe Bridging Communities (or Globe
BridgeCom) is the company's umbrella corporate social responsibility program, which leads and
supports various initiatives that promote the quality education, active citizenship to protect the
environment, social entrepreneurship and responsive governance through the innovative and
Communications Technology, resulting in enabled, empowered and enriched lives for its employees
and partner communities. Since its inception in 2003, Globe BridgeCom has made a positive impact on
the lives of thousands of public elementary and high school students, teachers, community leaders, and
micro-entrepreneurs throughout the country. For its efforts, Globe BridgeCom has been recognized
and conferred several awards and citations by various Philippine and international organizations.
The Globe Group is composed of the following companies: Globe Telecom, Inc. (Globe) provides digital wireless communications services in the
Philippines under the Globe Postpaid, Globe Prepaid, and Touch Mobile (TM) brands, using a
fully digital network. It also offers domestic and international long distance communication
services or carrier services; Innove Communications Inc. (Innove), a wholly-owned subsidiary, provides fixed line
telecommunications and broadband services, high-speed internet and private data networks for
enterprise clients, services for internal applications, internet protocol-based solutions and
multimedia content delivery.
On December 14, 2018, the President of the Philippines signed House Bill No. 5556 into RA No.
11151 entitled “Act Renewing For Another Twenty Five (25) Years the Franchise Granted to Isla
Communications Company, Inc. Presently Known as Innove Communications, Inc., Amending
for the Purpose Republic Act No. 7372 entitled “An Act Granting the Isla Communications Co. a
Franchise to Install, Operate and Maintain Telecommunications Services Within the Territory of
the Republic of the Philippines and International Points and for Other Purposes”. RA No. 11151
shall take effect 15 days after its publication in the Official Gazette or a newspaper of general
circulation. RA No. 11151 was published in the Official Gazette on December 27, 2018, and in
a newspaper of general circulation on January 14, 2019. 4|SEC FORM 17-A On November 2, 2015, Innove and Techzone Philippines incorporated TechGlobal Data Center,
Inc. (TechGlobal), a joint venture company formed for the purpose of operating and managing
all kinds of data centers, and providing information technology-enabled, knowledge-based and
computer-enabled support services. Innove and Techzone hold ownership interest of 49% and
51%, respectively. TechGlobal started commercial operations in August 2017; GTI Business Holdings, Inc. (GTI) is a wholly-owned subsidiary with authority to provide VOIP
services. Its wholly-owned subsidiaries are: GTI Corporation (GTIC US), Globe Telecom HK
Limited (GTHK), Globetel Singapore Pte. Ltd. (GTSG) and Globetel European Limited (GTEU).
GTEU‘s wholly owned subsidiaries are UK Globetel Limited (UKGT), Globe Mobile’ Italy S.r.l.
(GMI) and Globetel Internacional European España, S.L. (GIEE).
On June 2, 2016, the BOD approved the cessation of the operations of UKGT, GMI and GIEE
effective July 31, 2016. UKGT completed the liquidation process in 2018. The completion of the
regulatory requirements on the liquidation of GMI and GIEE is still in process as of December
31, 2018; Kickstart Ventures, Inc. (Kickstart) is the Philippines’ most active Corporate Venture Capital firm
investing in Seed to Series D digital startups. A wholly-owned subsidiary, Kickstart puts company
resources – capial, market, and expertise – behind startups so they can achieve scale and
profitability sooner. Kickstart’s subsidiary, Flipside Publishing Services, Inc. (FPSI) has ceased
operations in July 2016. As of reporting date, completion of regulatory requirements on the
liquidation of FPSI is still in process; Asticom Technology, Inc., a wholly-owned subsidiary, is engaged in trading, marketing,
installing, and servicing of computer equipment, peripherals, manpower, software, and other
data processing devices. Asticom was consolidated beginning June 2014. Globe Capital Venture Holdings, lnc. (GCVHI) is a wholly-owned subsidiary incorporated on
June 29, 2015. On October 13, 2015, GCVHI incorporated Adspark Holdings, Inc,, a wholly
owned subsidiary. GCVHI also owns 45% of Globe Fintech and 50% of Globe Telehealth.
On December 28, 2015, AHI incorporated its wholly-owned subsidiary, Adspark Inc. (AI), to
operate as an advertising company. On January 29, 2016, Adspark Inc. acquired 70% of the
shares of Socialytics Inc. (Socialytics).
On August 5, 2016, GFI incorporated its wholly-owned subsidiary, Fuse Lending, Inc. (Fuse),
to operate as a lending company. GFI also holds 45% ownership interest in GXI; Bayan Telecommunications, Inc. (Bayan), is a provider of data and communications services
such as dedicated domestic and international leased lines, frame relay services, Internet access,
and other managed data services like Digital Subscriber Lines (DSL). Globe Telecom owns
approximately 99% of BTI
.
On July 2, 2015, BTI issued additional shares to Globe Telecom following the approval of
National Telecommunications Commission (NTC) on the conversion of BTI’s Tranche A
convertible debt to equity. The conversion increased the ownership of Globe Telecom on BTI’s
outstanding shares from 38% to 54% controlling interest. On July 20, 2015, Globe Telecom
acquired additional voting shares of BTI, which further increased its controlling interest to 99%.
BTI is a facilities-based provider of data services and fixed-line telecommunications.
BTI’s subsidiaries are: Radio Communications of the Philippines, Inc. (RCPI), Telecoms
Infrastructure Corp. of the Philippines (Telicphil), Sky Internet, Incorporated (Sky Internet),
GlobeTel Japan (formerly BTI Global Communications Japan, Inc.), BTI Global Communications
Ltd. (BTI - UK), and NDTN Land, Inc. (NLI), (herein collectively referred to as “BTI Group”). On
April 8, 2016, RCPI sold its 100% interest in Alarmnet Inc. to a third party.
In July 2016, BTI - UK ceased its operations. The formal notice on the final dissolution of BTIUK effective March 14, 2017 was received from Companies House in UK. On May 30, 2017,
the Management Committee, with representation of at least sixty-seven percent of the total 5|SEC FORM 17-A voting interest, approved the termination of the Agreement on the Construction, Operation and
Maintenance of the National Digital Transmission Network dated November 28, 1996, as well
as the dissolution of Telicphil and NDTN Land, Inc.; TaoDharma (Tao), 67% owned by Globe Telecom, was established to operate and maintain
retail stores in strategic locations within the Philippines that will sell telecommunications or
internet-related services, devices, gadgets, and accessories.
On November 4, 2016, the BOD of Globe Telecom approved the increase in stake in Tao from
25% to 67% resulting to Globe Telecom’s gaining a controlling interest in Tao. GTowers Inc. (GTowers) is a fully owned subsidiary of Globe Telecom incorporated on August
17, 2018. As of December 31, 2018, GTowers is still under pre-operating stage. The Company is a grantee of various authorizations and licenses from the National
Telecommunications Commission (NTC) as follows: (1) license to offer and operate facsimile, other
traditional voice and data services and domestic line service using Very Small Aperture Terminal
(VSAT) technology; (2) license for inter-exchange services; and (3) Certificate of Public Convenience
and Necessity (CPCN) for: (a) international digital gateway facility (IGF) in Metro Manila, (b) nationwide
digital cellular mobile telephone system under the GSM standard (CMTS-GSM), (c) nationwide local
exchange carrier (LEC) services after being granted a provisional authority in June 2005, and (d)
international cable landing stations located in Nasugbu, Batangas, Ballesteros, Cagayan and Brgy.
Talomo, Davao City.
A. Business Development and Corporate History
In 1928, Congress passed Act No. 3495 granting the Robert Dollar Company, a corporation organized
and existing under the laws of the State of California, a franchise to operate wireless long distance
message services in the Philippines. Subsequently, Congress passed Act No. 4150 in 1934 to transfer
the franchise and privileges of the Robert Dollar Company to Globe Wireless Limited which was
incorporated in the Philippines on 15 January 1935.
Globe Wireless Limited was later renamed as Globe-Mackay Cable and Radio Corporation (“GlobeMackay”). Through Republic Act (“RA”) 4630 enacted in 1965 by Congress, its franchise was further
expanded to allow it to operate international communications systems. Globe-Mackay was granted a
new franchise in 1980 by Batasan Pambansa under Batas Pambansa 95.
In 1974, Globe-Mackay sold 60% of its stock to Ayala Corporation, local investors and its employees.
It offered its shares to the public on 11 August 1975.
In 1992, Globe-Mackay merged with Clavecilla Radio Corporation, a domestic telecommunications
pioneer, to form GMCR, Inc. (“GMCR”). The merger gave GMCR the capability to provide all forms of
telecommunications to address the international and domestic requirements of its customers. GMCR
was subsequently renamed Globe Telecom, Inc. (“Globe”).
In 1993, Globe welcomed a new foreign partner, Singapore Telecom, Inc. (STI), a wholly-owned
subsidiary of Singapore Telecommunications Limited (“SingTel”), after Ayala and STI signed a
Memorandum of Understanding.
In 2001, Globe acquired Isla Communications Company, Inc. (“Islacom”) which became its whollyowned subsidiary effective 27 June 2001. In 2003, the National Telecommunications Commission
(“NTC”) granted Globe’s application to transfer its fixed line business assets and subscribers to Islacom,
pursuant to its strategy to integrate all of its fixed line services under Islacom. Subsequently, Islacom
was renamed as Innove Communications, Inc. (“Innove”).
In 2004, Globe invested in G-Xchange, Inc. (“GXI”), a wholly-owned subsidiary, to handle the mobile
payment and remittance service marketed under the GCash brand using Globe’s network as transport
channel. GXI started commercial operations on 16 October 2004.
In November 2004, Globe and seven other leading Asia Pacific mobile operators (‘JV partners’) signed
an agreement (‘JV agreement’) to form Bridge Alliance. The joint venture company operates through a 6|SEC FORM 17-A Singapore-incorporated company, Bridge Mobile Pte. Limited (BMPL) which serves as a commercial
vehicle for the JV partners to build and establish a regional mobile infrastructure and common service
platform to deliver different regional mobile services to their subscribers. The Bridge Alliance currently
has a combined customer base of over 250 million subscribers among its partners in India, Thailand,
Hong Kong, South Korea, Macau, Philippines, Malaysia, Singapore, Australia, Taiwan and Indonesia.
In 2005, Innove was awarded by the NTC with a nationwide franchise for its fixed line business, allowing
it to operate a Local Exchange Carrier service nationwide and expand its network coverage. In
December 2005, the NTC approved Globe’s application for third generation (3G) radio frequency
spectra to support the upgrade of its cellular mobile telephone system (“CMTS”) network to be able to
provide 3G services. The Company was assigned with 10-Megahertz (MHz) of the 3G radio frequency
spectrum.
On May 19, 2008, following the approval of the NTC, the subscriber contracts of Touch Mobile or TM
prepaid service were transferred from Innove to Globe which now operates all wireless prepaid services
using its integrated cellular networks.
In August 2008, and to further grow its mobile data segment, Globe acquired 100% ownership of
Entertainment Gateway Group (“EGG”), a leading mobile content provider in the Philippines. EGG
offers a wide array of value-added services covering music, news and information, games, chat and
web-to-mobile messaging.
On 25 November 2008, Globe formed GTI Business Holdings, Inc. (GTIBH) primarily to act as an
investment company.
On October 30, 2008, Globe, the Bank of the Philippine Islands (BPI) and Ayala Corporation (AC)
signed a memorandum of agreement to form a joint venture that would allow rural and low-income
customers’ access to financial products and services. Last October 2009, the Bangko Sentral ng
Pilipinas (BSP) approved the sale and transfer by BPI of its shares of stock in Pilipinas Savings Bank,
Inc. (PSBI), formalizing the creation of the venture. Globe’s and BPI’s ownership stakes in PSBI is at
40% each, while AC’s shareholding is at 20%. The partners plan to transform PSBI (now called BPI
Globe BanKO, Inc.) into the country’s first mobile microfinance bank. The bank’s initial focus will be on
wholesale lending to other microfinance institutions but will eventually expand to include retail lending,
deposit-taking, and micro-insurance. BPI Globe BanKO opened its first branch in Metro Manila in the
first quarter of 2011 and now has 6 branches nationwide, over 2,000 partner outlets, 261,000 customers
and over ₱2.4 billion in its wholesale loan portfolio.
On March 2012, Globe launched Kickstart Ventures, Inc. (Kickstart) to help, support and develop the
dynamic and growing community of technopreneurs in the Philippines. Kickstart is a business incubator
that is focused on providing aspiring technopreneurs with the efficient environment and the necessary
mechanisms to start their own business. Since its launch, Kickstart has 10 companies in its portfolio
covering the digital media and technology, and web/mobile platform space.
In October 2013, following the court's approval of the Amended Rehabilitation Plan (jointly filed by Globe
and Bayantel in May 2013), Globe acquired a 38% interest in Bayantel by converting
Bayantel's unsustainable debt into common shares. This follows Globe's successful tender offer for
close to 97% of Bayantel's outstanding indebtedness as of December 2012. As part of the amended
rehab plan and pending regulatory approvals, Globe would further convert a portion of its sustainable
debt into common shares of Bayantel, bringing up its stake to around 56%. On October 2014, Globe
Telecom received a copy of the temporary restraining order (TRO) issued by the Court of Appeals (CA)
stopping the National Telecommunications Commission’s (NTC) proceedings in connection with the bid
of Globe Telecom Inc. to take over Bayan Telecommunications Inc. (Bayantel). Despite the lapse of the
Temporary Restraining Order (TRO) last December 9, 2014, the Court of Appeals has advised the NTC
to refrain from conducting any proceedings in connection with the bid of Globe assume majority control
of Bayantel.
On June 3, 2014, Globe signed an agreement with Azalea Technology, Inc. and SCS Computer
Systems, acquiring the entire ownership stake in Asticom. a systems integrator and information
technology services provider to domestic and international markets. 7|SEC FORM 17-A On July 20, 2015, Globe Telecom, lnc. ("Globe") has agreed to purchase from Bayan
Telecommunications Holdings, Corporation ("BTHC') and Lopez Holdings, Corporation ("LHC") all the
equity in the capital stock of Bayan Telecommunications, lnc. ("Bayan") that is he...
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