The Ayala group appears to be entering a new phase at Globe Telecom Inc.: after years of heavy network buildout, the Philippine carrier is finally easing capital expenditure. But rather than immediately channeling that breathing room into richer shareholder payouts, the numbers suggest Globe may first use the savings to defend its balance sheet and manage a costlier capital stack.
Ayala Corp., one of Globe’s two principal shareholders, owned 30.64% of the company’s common shares as of Dec. 31, 2025, alongside Singapore Telecom International Pte. Ltd., which held 43.36%. That makes Globe’s capital-allocation choices especially relevant to one of the Philippines’ most closely watched conglomerates, whose listed units are often judged on dividend discipline as much as on growth.
There is a clear reason investors are focusing on the spending cycle. Globe’s cash capex fell 18% to ₱46.2 billion in 2025 from ₱56.2 billion in 2024, with management saying the figure was in line with guidance and that about 90% of spending still went to data-related infrastructure. That decline marks a meaningful shift for a telecom operator that has spent years pouring cash into network expansion, fiber rollouts, and digital infrastructure.
At first glance, that should have created room for a more aggressive shareholder return story. Globe already sweetened its dividend framework in February 2024, lifting its payout policy to 60% to 90% of the previous year’s core net income, from the earlier 60% to 75% range. The company then maintained its common dividend at ₱25 per share each quarter in 2025, or ₱100 per share for the full year, and later declared another ₱25 per share for the first quarter of 2026.
But the financial backdrop argues for caution rather than generosity. While Globe’s EBITDA rose 1% to ₱87.6 billion in 2025 and EBITDA margin improved to 53.1% from 52.6%, the company’s net income fell 4% to ₱23.3 billion, and core net income slipped 3% to ₱20.9 billion. The reason was not a collapse in the business; instead, pressure built below EBITDA, where depreciation and amortization climbed 7% to ₱53.9 billion, and higher financing costs continued to weigh on profit conversion.
That pattern matters because Globe’s capex relief is arriving at a time when earnings are stable, not accelerating. Service revenues were essentially flat at ₱165.1 billion, even as the company continued to pivot toward higher-quality data income. Mobile data revenues rose 4% to ₱101.2 billion, while home broadband and corporate data each grew 1%. But those gains were offset by structural declines in legacy businesses: mobile voice fell 14%, mobile SMS dropped 28%, and fixed-line voice declined 17%. In other words, Globe is becoming more digital and more efficient, but it is not yet enjoying the kind of broad-based top-line lift that usually justifies a dividend step-up.
Cash flow tells a similar story. Globe remained solidly cash generative, but net cash from operating activities fell 6% to ₱79.5 billion in 2025. That level still easily covered annual capex and common dividends, but it also underscored a key point: the company’s improving free-cash-flow profile is being driven more by lower investment intensity than by stronger operating cash generation. For shareholders hoping for a dividend surge, that distinction is critical.
The balance sheet adds another layer of restraint. Globe ended 2025 with ₱256.3 billion in total interest-bearing debt, equivalent to 59% of total book capitalization, while gross debt to EBITDA stood at 2.63x, safely within its 3.5x covenant ceiling. Management has emphasized that liquidity remains ample and leverage prudent, but the company has also been explicit that its dividend decisions are reviewed in light of operating results, cash flows, debt covenants, capital expenditure levels, and liquidity. That language leaves little doubt that debt capacity still sits near the center of the payout debate.
The clearest sign that liability management may come before dividend enhancement came in early 2026. On Feb. 11, 2026, Globe disclosed that it had successfully priced ₱25 billion of perpetual non-voting preferred shares, with Series A carrying an initial dividend rate of 6.1179% and Series B carrying an initial dividend rate of 6.7631%. The company then followed on Apr. 14, 2026, with the launch of a tender offer to purchase any and all outstanding US$600 million 4.2% Senior Perpetual Capital Securities issued in 2021. Taken together, those moves point to a company reshaping its long-duration funding base even as capex moderates.
Economically, the optics are notable. The new preferred shares were priced at higher headline rates than the old 4.2% U.S.-dollar perpetual capital securities, even if the instruments may be treated differently for accounting purposes. That means Globe is not simply harvesting capex savings and handing them to common shareholders; it is also tending to a financing structure that still demands attention. For investors, the implication is straightforward: easing capex is creating more flexibility, but some of that flexibility may be spoken for by refinancing and fixed-charge management before it reaches the common dividend line.
That does not mean dividends are under threat. Quite the opposite: Globe’s payout remains intact, the policy range is wider than before, and the company reported ₱16.8 billion in unrestricted retained earnings available for dividend declaration as of Dec. 31, 2025, up from ₱12.6 billion a year earlier. The company also maintained its quarterly ₱25-per-share cadence throughout 2025 and into 2026. For income investors, that is a sign of stability.
Still, stability is not the same as acceleration. Globe’s own disclosures suggest management is balancing three priorities at once: preserving dividend credibility, maintaining network quality with lower but still substantial capex, and ensuring that debt and perpetual funding costs do not erode post-EBITDA cash flow. In that framework, the most likely next step is not a celebratory bump in the common payout, but a quieter strengthening of the balance sheet.
For the Ayalas, that may be the more valuable outcome anyway. A flatter capex curve and a cleaner funding profile could eventually support a stronger and more durable dividend stream from Globe. But for now, the company’s disclosures point to a simpler hierarchy: first, make the capital structure safer; later, decide how much of the savings can be shared.
We’ve been blogging for free. If you enjoy our content, consider supporting us!
Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
Comments
Post a Comment