The Ayala Group may find it harder to squeeze higher dividends from Globe Telecom Inc. as the phone carrier’s latest quarterly results show rising financial strain beneath otherwise resilient operating numbers.
Globe, one of the Philippines’ largest telecommunications companies and a key dividend contributor to Ayala Corp., reported a 20% drop in first-quarter net income to ₱5.55 billion, even as service revenues climbed 5% to ₱41.97 billion. The divergence points to a growing challenge for shareholders: Globe’s core business is still expanding, but more of its cash and earnings are being absorbed by debt costs, capital spending, and foreign-exchange volatility.
For investors counting on rising payouts, the message from the March quarter was mixed. Globe’s core net income rose 9% to ₱4.93 billion, and EBITDA increased 7% to ₱22.17 billion, with margin improving to 52.8% from 52.1% a year earlier. Yet reported net income fell sharply, reflecting the absence of prior-year one-off gains, higher net interest expense, and foreign-exchange losses.
The numbers underscore a new reality for Globe’s dividend story. The company remains operationally strong, but its ability to deliver higher cash returns is increasingly constrained by the financial burden of running a capital-intensive telecom network in a high-rate, currency-volatile environment.
Debt Costs Bite
The biggest pressure point is financing. Globe’s total financing costs rose to ₱6.39 billion in the first quarter, more than double the level a year earlier. Interest expense alone reached ₱4.23 billion, up 10% year-on-year, while swap costs and other financing costs also increased.
That burden matters because dividends are ultimately paid after interest, taxes, and reinvestment needs. Globe still generates substantial operating cash, but a larger share of earnings is being diverted to creditors before common shareholders are rewarded.
Globe ended March with ₱251.24 billion in total debt, down slightly from year-end 2025 but still significant relative to earnings. Its gross debt-to-EBITDA ratio stood at 2.61 times, comfortably below covenant limits, while net debt-to-EBITDA was 2.17 times.
Those leverage ratios suggest no immediate balance-sheet distress. But for dividend investors, the issue is less about solvency and more about headroom. If refinancing costs remain elevated, Globe may prefer to conserve cash or keep dividends flat rather than increase distributions.
Capex Is Competing With Dividends
Globe’s investment cycle is another constraint. Cash capital expenditures jumped 51% year-on-year to ₱12.74 billion in the first quarter, as the company continued to invest in network expansion and capacity improvements. Capex represented 30% of service revenues, up from 21% a year earlier.
The company said about 91% of capex was allocated to data-related initiatives, reflecting continued investment in digital capacity and network quality.
That spending supports Globe’s long-term competitiveness. Mobile data revenues grew 11% to ₱26.78 billion, while home broadband revenues rose 6% to ₱6.18 billion. Wired broadband subscribers climbed 36% year-on-year to 1.92 million, and GFiber Prepaid reached 1 million subscribers, showing that fiber adoption continues to gain traction.
But the same investments that sustain growth also limit the expansion of free cash flow. Globe generated ₱23.56 billion in operating cash flow during the quarter. After cash capex of ₱12.74 billion, the company had a pre-dividend cash flow surplus of about ₱10.8 billion. That remains healthy, but the buffer narrows if capex overshoots, interest costs rise further, or the peso weakens.
For the Ayalas, that means Globe may remain a dependable dividend source, but not necessarily a growing one.
FX Swings Add Volatility
Foreign exchange was another drag. Globe booked a ₱2.01 billion net foreign-exchange loss in the first quarter, compared with an ₱823 million gain in the same period last year.
The company’s financial statements show why currency movements matter. Foreign-currency-linked revenues represented only about 4% of gross service revenues, while foreign-currency-linked expenses accounted for 17% of operating expenses. Globe also reported net U.S. dollar and Japanese yen liability exposure before hedging, though it uses swaps and forwards to manage those risks.
Globe said that after swaps, effectively none of its total debt is denominated in U.S. dollars or Japanese yen. Still, the quarter’s FX loss shows that hedging does not fully eliminate earnings volatility.
For shareholders, FX volatility is especially relevant because it can disrupt reported earnings even when operating performance remains stable. A weaker peso may not immediately threaten Globe’s operations, but it can reduce accounting profit and pressure the board to be more conservative on dividends.
Liquidity Has Improved, But Not Enough to Remove Caution
Globe’s liquidity position improved during the quarter. Cash and cash equivalents rose to ₱42.4 billion from ₱25.0 billion at the end of 2025. Its current ratio improved to 0.81 times from 0.66 times.
Still, the current ratio remains below 1.0, indicating that short-term obligations continue to exceed short-term assets. Globe said it remains confident in its liquidity sources and has access to credit facilities. But the balance-sheet profile suggests management has reason to preserve flexibility.
The company also raised ₱25 billion by issuing non-voting preferred shares in March. The offer was 2.4 times oversubscribed, with fixed dividend rates of 6.1179% for Series A and 6.7631% for Series B. Proceeds are intended to redeem all or part of Globe’s U.S. dollar perpetual capital securities and fund capital expenditures.
That transaction strengthens liquidity, but it also adds another layer of capital obligations. Preferred dividends sit ahead of common shareholders, meaning Globe’s common dividend capacity must now be assessed alongside preferred-share commitments.
Dividend Flexibility Cuts Both Ways
Globe’s board declared a first-quarter common cash dividend of ₱25 per share, equivalent to about ₱3.6 billion, paid in March. The company’s dividend policy allows it to distribute 60% to 90% of the prior year’s core net income.
That range gives management flexibility. In strong periods, Globe can maintain generous payouts. In more difficult periods, it can move toward the lower end of the policy without technically abandoning its dividend framework.
That flexibility may become more important if interest rates remain high or if capital spending stays elevated. Globe’s dividend is not yet under obvious threat, but the case for meaningful increases looks weaker.
The Operating Business Still Has Strength
To be clear, Globe’s first-quarter results were not weak operationally. Mobile service revenues increased by 6% year-on-year to ₱29.97 billion, supported by sustained mobile data demand. Mobile data now accounts for 89% of total mobile service revenues, up from 85% a year earlier.
Home broadband also continued to improve, while corporate data revenues rose 6% year-on-year to ₱5.14 billion, helped by a 17% increase in ICT revenues from business application solutions, cloud and cybersecurity.
Globe’s fintech exposure also remains a major support. Its equity share in Mynt, the parent of GCash, rose to ₱1.9 billion, up 8% year-on-year and 120% quarter-on-quarter, accounting for about 30% of Globe’s net income before tax.
That contribution gives Globe a valuable earnings lever outside traditional telecoms. But it also means the investment case is becoming more complex: dividend capacity now depends not only on mobile and broadband cash flows, but also on the performance of fintech affiliates, financing markets, and currency conditions.
A Dividend Story With Less Room for Error
For Ayala Corp., Globe has long been one of the group’s most important cash-generating assets. But the latest results suggest the ability to extract more dividends may be constrained by a tighter financial equation.
The company is still profitable, cash-generative, and strategically positioned in mobile data, fiber broadband, and digital finance. Yet higher financing costs, heavy network spending, FX losses, and less-than-ideal liquidity metrics all reduce room for aggressive dividend growth.
A dividend cut does not appear to be the base case. Globe’s operating cash flow remains strong, leverage is within covenant limits, and core earnings are still growing. But the conditions that could force a more conservative payout are now visible in the numbers: sustained high interest rates, refinancing pressure, FX shocks, capex overshoot, and liquidity preservation.
For investors, the takeaway is that Globe remains a dividend payer—but perhaps no longer one from which shareholders can easily expect more.
The Ayalas may still collect steady dividends from the telco. Extracting higher ones, however, may prove increasingly difficult as debt, spending, and currency pressures mount.
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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.
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