Disclosure Document
Disclosure Document
Disclosure Document
P W 0 0 0 0 1 1 7 7
G L O B E T E L E C O M , I N C .
2 7 / F T H E G L O B E T O W E R
3 2 N D S T R E E T C O R N E R 7 T H A V E N U E
B O N I F A C I O G L O B A L C I T Y T A G U I G
(Business Address: No. Street City / Town / Province)
1 2 3 1
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Month Day FORM TYPE Month Day
Fiscal Year Annual Meeting
Domestic Foreign
Document I.D.
Cashier
STAMPS
7. 27/F, The Globe Tower, 32nd Street corner 7th Avenue, 1634
.... _oni fac io _. lo b al _City , . Taguig .... ...... ........ ... .... ... ......... .. .. .. ...... ..... .. .... .. ....... ... .... .
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Address of principal office Postal code
9. NIA
Former name or former address, if changed since last report
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Indicate the item numbers reported herein c...h...e..d................. ...........
P u rsuant to th e r e qu irements of the Securities Regulations Code, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date : 27 February 2020
ROS MARIE MANIEGO-EALA
. o· Chief Finance Officer
I'!I•
OGlobe 0 Globe Telecom, Inc.
TheGlobe Tower
32nd Street corner 7th Avenue
Bonifacio Global City
Taguig, Philippines
(ti +632.7972000
www.globe.com.ph
27 February 2020
Attached is the audited consolidated financial statements of Globe Telecom, Inc. and its
subsidiaries, which comprise the consolidated statements of financial position as at December
31, 2019 and 2018, the consolidated statements of comprehensive income, consolidated
statements of changes in equity and consolidated statements of cash flows for the financial years
ended December 31, 2019, 2018, and 2017, and a summary of significant accounting policies
and other explanatory information.
Thank you.
.
R MANIEGO-EAI.A
Chief Finance Officer
@Grobe ') GlobeTelecom,Inc.
TheGlobe Tower
32nd Street corner 7th Avenue,
Bonifacio Global City.
Taguig. Phil1p p 1nes 1634
f 63) 7972000
,: wwwglobe.com.ph
'-::
STATEMENT Of M AN AGEM ENT 'S RESPONSIB I LI T Y
FOR CO NSOLID AT ED FI N ANC I AL ST ATEM ENTS
The management of Globe Telecom. Inc. and Subsidiaries ("Globe Group..) is responsible for the preparation and
fair presentation of the conso lidated financial sta tements including the schedules attached therein. as at
December 31. 2019, and 20 I8 a nd for each of the three years in the period ended December 3 L 2019. in accordance
with Philippine Financial Reponing Standards. and for such internal control as management determines is necessary
to enable the preparation of the consolidated financial statements that are free from material misstatemem. whether
due to frat1d or error.
In preparing the consolidated financial statements, management is responsible for assessing the Globe Group' s
ability to continue as a going concern, disclosing, as applicab le. matters related to going concern and using the going
concern basis of ac co unting unless management either intends to liquidate the Globe Group or to cease operations.
or has no realistic alte rnative but to do so.
The Board of Directors is responsible for overseeingthe GIobeGroup·s financial reporting process.
The Board of Directors reviews and approves the consolidated financial s tatements including the schedules attached
therein, and submits the same to the stockholders.
Navan-o Amper & Co., the independent auditors appointed by the stockholders has audit consolidated financial
statements of the Globe Group in accordance with Philippine Standards on Au·d ng, nd in its report to the
stockholders, has expressed its opinion on the fairness of presentation u 1 c nplef n of 1ch audit.
ROSEMARIE MANlEGO-EALA
Chief Finance Officer and Treasurer
SUBSCRJBEDAND SWORN to before me this FEBO 3 2020 I AC'J; City. affiants who
c:,y
are personally known to me or identi fied through competent evidence of ide ntity, to wit:
CREATE.WONDERFUL.
NavarroAmp er&Co. Navarro Amper & Co.
19th Floor Net Lima Plaza
5th Avenue corner 26th Street
Bonifacio Global City, Taguig 1634
Philippines
Opinion
We have audited the consolidated financial statements of Globe Telecom, Inc. and Subsidiaries
(the "Globe Group") which comprise the consolidated statements of financial position as at
December 31, 2019 and 2018, and the consolidated statements of comprehensive income,
consolidated statements of changes in equity and consolidated statements of cash flows for each
of the three years in the period ended December 31, 2019, and the notes to the consolidated
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the financial position of the Globe Group as at December 31, 2019 and 2018, and its
financial performance, and cash flows for each of the three years in the period ended
December 31, 2019, in accordance with Philippine Financial Reporting Standards (PFRSs).
Deloitte. lllllllllllllllllllllllllllllllllllllllllllllllllllllll
We identified the following key audit matters:
Revenue recognition
How the matter was addressed in our audit
l l l l l l l l l l l l l l l l l l l l l l l l l l l l l ll l ll l ll l l l l l l l1 1 1 1 1 1 1 1 1 1 11 1 1
Adoption of PFRS 16, Leases How the matter was addressed in our audit
The Globe Group has adopted PFRS 16, Leases, In the course of our audit of the Globe Group's
effective January 1, 2019, which replaced the consolidated financial statements, we have
Philippine Accounting Standards 17, Leases. performed, among others, the following audit
The adoption of PFRS 16 requires policy procedures in response to the adoption of PFRS
elections including the determination of specific 16:
assumptions and key judgements and
estimates relating to, among others, • We obtained an understanding and evaluated
determination of the scope of PFRS 16, duration Globe Group's adoption and implementation
of the leases, lease payments and discount process as well as selection and application
rates. The assessment of the impact of the new of accounting principles in accordance with
standard is significant to our audit. Considering PFRS 16, including an understanding and
the above, as well as since the Globe Group assessment of the key controls in this respect.
adopted the standard for the purpose of the
preparation of the consolidated financial • We evaluated management judgements and
statements for the first time, the estimates, specifically the assessment of the
implementation of PFRS 16 was considered as scope of contracts subject to accounting under
a key audit matter. PFRS 16, determination of the duration of
leases and related lease payments, discount
In adopting PFRS 16, the Globe Group's rates and applied practical expedients.
Management decided to use the modified • We performed test of the related IT system in
retrospective approach. relation to accounting for contracts under PFRS
16.
The disclosures related to the impact of the
initial application of PFRS 16 are included in • We performed test of details to verify the
Note 3.1, Adoption of PFRS 16, Leases, accuracy of parameters used and accuracy in
the calculation of lease liabilities and right-of
Effective January 1, 2019, and the disclosures
use assets.
related to right-of-use assets and lease
liabilities are included in Note 13, Lease • We performed test of completeness of
Commitments, to the consolidated financial identification of contracts in scope of PFRS 16.
statements.
Information Other than the Consolidated Financial Statements and Auditors' Report
Thereon
Management is responsible for the other information. The other information comprises the
information included in the Securities and Exchange Commission (SEC) Form 20-IS (Definitive
Information Statement), SEC Form 17-A and Annual Report for the year ended
December 31, 2019, but does not include the consolidated financial statements and our auditors'
report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and
Annual Report for the year ended December 31, 2019 are expected to be available to us after
the date of this auditors' report.
Our opinion on the consolidated financial statements does not cover this other information and
we do not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to
read the other information identified above when it becomes available and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
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Responsibilities of Management and Those Charged with Governance for the
Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with PFRSs, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing
the Globe Group's ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Globe Group or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Globe Group's financial
reporting process.
Il l l l l l l l l l l l l l l l l l l l ll l l l l l l l l l l l ll l l l l l l ll l l l l l 1 1 1 1 1 1 1 1
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the consolidated financial statements of
the current period and are therefore the key audit matters. We describe these matters in our
auditors' report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditors' report is
Mr. Wilfredo A. Baltazar.
By:
/,J i ( fr� A .
� Wilf�do A.
Balt;�r �
Partner
CPA License No. 0078498
SEC A.N. 0723-AR-3, issued on August 24, 2017; effective until August 23, 2020, Group A
TIN 115858485
BIR A.N. 08-002552-10-2017, issued on June 8, 2017; effective until June 8, 2020
PTR No. A-4689427, issued on January 2, 2020, Taguig City
CREATE.WONDERFUL.
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31
Notes 2019 2018 2017
(In Thousand Pesos, Except Per Share Figures)
REVENUES
Service revenues ₱149,009,963 ₱132,875,310 ₱127,905,853
Nonservice revenues 17,650,374 18,297,496 7,374,878
34 166,660,337 151,172,806 135,280,731
INCOME (LOSSES)
Equity share in net losses of associates and joint ventures 15 (2,554,782) (1,249,603) (846,177)
Interest income 23 500,437 391,030 139,581
Gain on disposal of property and equipment – net 43,012 73,088 38,455
Gain on fair value of retained interest 15 - - 1,889,901
Other income – net 24 1,047,007 695,405 701,653
(964,326) (90,080) 1,923,413
COSTS AND EXPENSES
General, selling and administrative expenses 25 64,471,409 57,742,131 56,608,922
Depreciation and amortization 26 34,143,541 30,421,721 27,512,689
Cost of inventories sold 9, 34 18,554,814 18,645,314 13,013,437
Interconnect costs 35 3,982,873 5,677,375 7,852,336
Financing costs 27 6,802,861 6,195,225 5,251,692
Impairment and other losses 28 4,913,137 4,787,644 5,423,366
132,868,635 123,469,410 115,662,442
INCOME BEFORE INCOME TAX 32,827,376 27,613,316 21,541,702
PROVISIONS FOR INCOME TAX
Current 8,488,595 7,259,985 6,005,420
Deferred 2,055,024 1,727,388 452,069
30 10,543,619 8,987,373 6,457,489
NET INCOME 22,283,757 18,625,943 15,084,213
OTHER COMPREHENSIVE INCOME (LOSS)
Items that will be reclassified into profit or loss in
subsequent periods:
Transactions on cash flow hedges – net (1,213,355) 863,715 139,412
Exchange differences arising from translations of
foreign investments (106,988) 28,524 (23,140)
Changes in fair value of available-for-sale
investment in equity securities - - 26,000
22.6 (1,320,343) 892,239 142,272
Item that will not be reclassified into profit or loss in
subsequent periods:
Changes in fair value of financial assets at fair value through
other comprehensive income 440,349 151,974 -
Remeasurement gain on defined benefit plan (1,373,043) 49,709 399,993
22.6 (932,694) 201,683 399,993
TOTAL OTHER COMPREHENSIVE INCOME (2,253,037) 1,093,922 542,265
(Forward)
CREATE.WONDERFUL.
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31
Notes 2019 2018 2017
(In Thousand Pesos, Except Per Share Figures)
Total net income attributable to:
Equity holders of the Parent ₱22,269,340 ₱18,640,740 ₱15,065,779
Non-controlling interest 14,417 (14,797) 18,434
22,283,757 18,625,943 15,084,213
Total comprehensive income attributable to:
Equity holders of the Parent 20,016,303 19,734,662 15,608,044
Non-controlling interest 14,417 (14,797) 18,434
Cash dividends declared per common share 22.3 ₱91.00 ₱91.00 ₱91.00
See accompanying Notes to Consolidated Financial Statements.
CREATE.WONDERFUL.
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
For the Year Ended December 31, 2019
Capital Additional Cost of Other Total Equity
Stock Paid-in Share-Based Reserves Retained Attributable Non-controlling
Notes (Note 22.2) Capital Payments (Note 22.6) Earnings to Parent Interest Total
As of January 1, 2019, as restated 8,445,238 36,528,251 417,345 561,103 27,503,862 73,455,799 24,677 73,480,476
Total comprehensive income for the period - - - (2,253,037) 22,269,340 20,016,303 14,417 20,030,720
Dividends on: 22.3
Common Stock - - - - (12,118,071) (12,118,071) - (12,118,071)
Preferred Stock - voting - - - - (50,027) (50,027) - (50,027)
Preferred Stock – non-voting - - - - (520,060) (520,060) - (520,060)
Share-based compensation 29 - - 325,160 - - 325,160 - 325,160
Exercise of stock options 22.2 499 11,354 (4,300) - - 7,553 - 7,553
Issue of shares under share-based
compensation plan 22.2 7,258 269,171 (276,429) - - - - -
Forfeiture of stock option - - (14,120) - 9,884 (4,236) - (4,236)
Reclassification of accumulated share in an
- -
associate’s other comprehensive income 22.6 - - 1,101 (1,101)
Reclassification of fair value gain on
investment in equity securities at FVOCI 22.6 - - - (75,777) 75,777 - - -
Minority buyout from subsidiary - - - - - - (536) (536)
Non-controlling interest arising from
business combination - - - - - - 96,018 96,018
As of December 31, 2019 ₱8,452,995 ₱36,808,776 ₱447,656 (1,766,610) ₱37,169,604 ₱81,112,421 ₱134,576 ₱81,246,997
(Forward)
CREATE.WONDERFUL.
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
For the Year Ended December 31, 2018
Capital Additional Cost of Other Total Equity
Stock Paid-in Share-Based Reserves Retained Attributable Non-controlling
Notes (Note 22) Capital Payments (Note 22.6) Earnings to Parent Interest Total
(In Thousand Pesos)
As of January 1, 2018, as previously stated ₱8,438,404 ₱36,319,449 ₱401,543 (₱352,375) ₱21,708,003 ₱66,515,024 ₱42,713 ₱66,557,737
Adjustment on initial application of
PFRS 15, net of tax 3.4 - - - - 4,880,805 4,880,805 954 4,881,759
Adjustment on initial application of
PFRS 9, net of tax 3.4 - - - - (5,581,683) (5,581,683) (4,843) (5,586,526)
As of January 1, 2018, as restated 8,438,404 36,319,449 401,543 (352,375) 21,007,125 65,814,146 38,824 65,852,970
Total comprehensive income for the year - - - 1,093,922 18,640,740 19,734,662 (14,797) 19,719,865
Dividends on: 22.3
Common Stock - - - - (12,104,579) (12,104,579) - (12,104,579)
Preferred Stock – voting - - - - (41,752) (41,752) - (41,752)
Preferred Stock – non-voting - - - - (520,060) (520,060) - (520,060)
Share-based compensation 29 - - 236,714 - - 236,714 - 236,714
Issue of shares under share-based
compensation plan 22.2 6,463 202,629 (208,221) - - 871 - 871
Exercise of stock options 22.2 371 6,173 (4,862) - - 1,682 - 1,682
Forfeiture of stock options - - (7,829) - 5,480 (2,349) - (2,349)
Reclassification remeasurement gains
(losses) on defined benefit plans 22.6 - - - (180,444) 180,444 - - -
Non-controlling interest arising from
business combination - - - - - - 145 145
As of December 31, 2018 ₱8,445,238 ₱36,528,251 ₱417,345 ₱561,103 ₱27,167,398 ₱73,119,335 ₱24,172 ₱73,143,507
(Forward)
CREATE.WONDERFUL.
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
For the Year Ended December 31, 2017
Capital Additional Cost of Other Total Equity
Stock Paid-in Share-Based Reserves Retained Attributable Non-controlling
Notes (Note 22) Capital Payments (Note 22.6) Earnings to Parent Interest Total
As of December 31, 2017 ₱8,438,404 ₱36,319,449 ₱401,543 (₱352,375) ₱21,708,003 ₱ 66,515,024 ₱42,713 ₱66,557,737
See accompanying Notes to Consolidated Financial Statements.
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GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
CREATE.WONDERFUL.
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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GLOBE TELECOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
Corporate Information
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1.3 GTI Business Holdings, Inc. (GTI) and Subsidiaries
Globe Telecom owns 100% of GTI. GTI was incorporated and registered under the laws of the
Philippines, on November 25, 2008, as a holding company.
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1.5 Asticom Technology, Inc. (Asticom)
On June 3, 2014, Globe Telecom signed an agreement with Azalea Technology Investments Inc. (ASTI)
and SCS Computer Systems, Pte. Ltd. acquiring 100% ownership stake in Asticom. Asticom is primarily
engaged in providing business process and shared service support, as well as IT system integration and
consultancy services.
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1.9 GTowers Inc (GTowers)
On August 17, 2018, GTowers was incorporated as a wholly owned subsidiary of Globe Telecom.
GTowers is still under pre-operating stage as of reporting date.
2
Summary of Significant Accounting Policies
CREATE.WONDERFUL. 13
with Philippine Financial Reporting Standards (PFRS), which includes all applicable PFRS, Philippine
Accounting Standards (PAS), and Interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC), Philippine Interpretations Committee (PIC), and Standing
Interpretations Committee (SIC) as approved by the Financial Reporting Standards Council (FRSC) and
the Board of Accountancy, and adopted by the Securities and Exchange Commission (SEC).
CREATE.WONDERFUL. 14
2.4 Business Combination and Goodwill
Acquisitions of businesses are accounted for using the purchase method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair
values of the assets transferred by the Globe Group, liabilities incurred by the Globe Group to the former
owners of the acquiree and the equity interest issued by the Globe Group in exchange for control of the
acquiree. Acquisition related costs are generally recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their
fair value except that:
deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements
are recognized and measured in accordance with PAS 12, Income Taxes and PAS 19, Employee
Benefits, respectively;
liabilities and equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangement of the Globe Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with PFRS 2, Share-based Payment, at the
acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with PFRS 5, Non- current
assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interest in the acquiree, and the fair value of the acquirer’s previously held equity interest in the
acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the
acquiree (if any), the excess is recognized immediately in the consolidated profit or loss as bargain purchase
gain.
Goodwill is not amortized but is reviewed for impairment at least annually. For purposes of impairment
testing, goodwill is allocated to each of the Globe Group’s cash-generating units that are expected to
benefit from the synergies of the combination.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate
share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at
the non-controlling interests’ proportionate share of the recognized
amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a
transaction-by-transaction basis. Other types of non-controlling interest are measured at fair value or,
when applicable, on the basis specified in another PFRS.
When the consideration transferred by the Globe Group in a business combination includes assets or
liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured
at its acquisition-date fair value and included as part of the consideration transferred in a business
combination. Changes in the fair value of the contingent consideration that qualify as measurement period
adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement
period adjustments are adjustments that arise from additional information obtained during the measurement
period (which cannot exceed one year from acquisition date) about facts and circumstances that existed at
the acquisition date.
CREATE.WONDERFUL. 15
The subsequent accounting for the changes in fair value of the contingent consideration that do not qualify
as measurement period adjustments depends on how the contingent consideration is classified. Contingent
consideration that is classified as equity is not measured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration that is classified as an asset or a
liability is remeasured at subsequent reporting dates in accordance with PFRS 9, Financial Instruments, or
PAS 37, Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding
gain or loss being recognized in profit or loss.
When a business combination is achieved in stages, the Globe Group’s previously held equity interest in
the acquiree is remeasured to its acquisition-date fair value and the resulting gain or loss, if any, is
recognized in profit or loss. Amount arising from interests in the acquiree prior to the acquisition date
that have previously been recognized in other comprehensive income are reclassified to profit or loss
where such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in
which the combination occurs, the Globe Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or
additional assets or liabilities are recognized, to reflect new information obtained about facts and
circumstances that existed at the acquisition date that, if known, would have affected the amounts
recognized at that date.
CREATE.WONDERFUL. 16
When the Parent Company has less than a majority of the voting or similar rights of an investee, the Parent
Company considers all relevant facts and circumstances in assessing whether it has power over an investee,
including:
the contractual arrangement with the other vote holders of the investee;
rights arising from other contractual arrangements; and
the Parent Company’s voting rights and potential voting rights.
The Globe Group re-assesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control.
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2.5 Financial Instruments
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Financial assets classified under this category are disclosed in Note 33.1.
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Significant increase in credit risk
In assessing whether the credit risk on non-trade receivables has increased significantly since initial
recognition, the Globe Group compares the risk of a default occurring on the financial instrument at the
reporting date with the risk of a default occurring on the financial instrument at the date of initial
recognition. In making this assessment, the Globe Group considers both quantitative and qualitative
information that is reasonable and supportable, including histo rical experience and forward-looking
information that is available without undue cost or effort. The forward-looking information considered
includes the future prospects of the industries in which the Group’s debtors operate.
In particular, the following information is taken into account when assessing whether credit risk has
increased significantly since initial recognition:
an actual or expected significant deterioration in the financial instrument’s credit rating;
significant deterioration in external market indicators of credit risk for a particular financial
instrument;
existing or forecast adverse changes in business, financial or economic conditions that are expected
to cause a significant decrease in the debtor’s ability to meet its debt obligations;
an actual or expected significant deterioration in the operating results of the debtor;
significant increases in credit risk on other financial instruments of the same debtor;
an actual or expected significant adverse change in the regulatory, economic, or technological
environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt
obligations.
Irrespective of the outcome of the above assessment, the Globe Group presumes that the credit risk on
non-trade receivables has increased significantly since initial recognition when contractual payments are
more than 30 days past due unless the Globe Group has reasonable and supportable information that
demonstrates otherwise.
Despite the foregoing, the Globe Group assumes that the credit risk on non-trade receivables has not
increased significantly since initial recognition if the instrument is determined to have low credit risk at
the reporting date. The Globe Group considers a financial asset to have low credit risk when the
counterparty has a strong financial position and there is no past due amounts. An instrument is
determined to have low credit risk if:
The financial instrument has a low risk of default,
The debtor has a strong capacity to meet its contractual cash flow obligations in the near term,
and
Adverse changes in economic and business conditions in the longer term may, but will not
necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.
The Globe Group regularly monitors the effectiveness of the criteria used to identify whether there has
been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are
capable of identifying significant increase in credit risk before the amount becomes past due.
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Definition of default
For subscribers receivable and contract assets, the Globe Group considers that default has occurred
when the subscriber has been permanently disconnected.
For all other receivables, The Globe Group considers the following as constituting an event of default as
historical experience indicates that financial assets that meet either of the following criteria are generally
not recoverable:
when there is a breach of financial covenants by the debtor; or
information developed internally or obtained from external sources indicates that the debtor is
unlikely to pay its creditors, including the Globe Group, in full (without taking into account any
collateral held by the Group).
Irrespective of the above analysis, the Globe Group considers that default has occurred when a financial
asset is more than 90 days past due unless the Globe Group has reasonable and supportable information to
demonstrate that a more lagging default criterion is more appropriate.
Write-off policy
The Group writes off a financial asset when there is information indicating that the debtor is in severe
financial difficulty and there is no realistic prospect of recovery, (e.g. when the debtor has been placed
under liquidation or has entered into bankruptcy proceedings, or when the Group has effectively
exhausted all collection efforts). Financial assets written off may still be subject to enforcement
activities under the Globe Group’s recovery procedures, taking into account legal advice where
appropriate. Any recoveries made are recognized in profit or loss.
CREATE.WONDERFUL. 21
If the Globe Group has measured the loss allowance for a financial instrument at an amount equal to
lifetime ECL in the previous reporting period, but determines at the current reporting date that the
conditions for lifetime ECL are no longer met, the Globe Group measures the loss allowance at an
amount equal to 12-month ECL at the current reporting date, except for assets such as trade receivables
and contract assets for which simplified approach was used.
The Globe Group recognizes an impairment gain or loss in profit or loss for all financial instruments with
a corresponding adjustment to their carrying amount through a loss allowance account.
Capital Stock
Capital stock is recognized as issued when the stock is paid for or subscribed under a binding subscription
agreement and is measured at par value. The transaction costs incurred as a necessary part of completing
an equity transaction are accounted for as part of that transaction and are deducted from additional paid-in
capital, net of related income tax benefits.
Retained Earnings
Retained earnings represent accumulated profit attributable to equity holders of the Parent Company
after deducting dividends declared. Retained earnings may also include effect of changes in
accounting policy as may be required by the standard’s transitional provisions.
CREATE.WONDERFUL. 22
2.5.5 Derivative Instruments
Derivative financial instruments are initially recognized at fair value on the date on which a derivative
contract is entered into and are subsequently measured at fair value. Derivatives are carried as financial
assets when the fair value is positive and as financial liabilities when the fair value is negative.
The method of recognizing the resulting gain or loss depends on whether the derivative is designated as
a hedge of an identified risk and qualifies for hedge accounting treatment. The objective of hedge
accounting is to match the impact of the hedged item and the hedging instrument in the consolidated
profit or loss. To qualify for hedge accounting, the hedging relationship must comply with requirements
such as the designation of the derivative as a hedge of an identified risk exposure, hedge documentation,
probability of occurrence of the forecasted transaction in a cash flow hedge, assessment (both
prospective and retrospective bases) and measurement of hedge effectiveness, and reliability of the
measurement bases of the derivative instruments.
Upon inception of the hedge, the Globe Group documents the relationship between the hedging
instrument and the hedged item, its risk management objective and strategy for undertaking various hedge
transactions, and the details of the hedging instrument and the hedged item. The Globe Group also
documents its hedge effectiveness assessment methodology, both at the hedge inception and on an
ongoing basis, as to whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged items.
Hedge effectiveness is likewise measured, with any ineffectiveness being reported immediately in the
consolidated profit or loss.
CREATE.WONDERFUL. 23
Cash Flow Hedges
A cash flow hedge is a hedge of the exposure to variability in future cash flows related to a recognized
asset, liability or a forecasted sales transaction. Changes in the fair value of a hedging instrument that
qualifies as a highly effective cash flow hedge are recognized in other comprehensive income and
accumulated in other equity reserves. Any hedge ineffectiveness is immediately recognized in the
consolidated profit or loss.
If the hedged cash flow results in the recognition of a nonfinancial asset or liability, gains and losses
previously recognized in other comprehensive income are transferred from equity and included in the
initial measurement of the cost or carrying value of the asset or liability.
Otherwise, for all other cash flow hedges, gains and losses initially recognized in equity are transferred
to consolidated profit or loss in the same period or periods during which the hedged forecasted
transaction or recognized asset or liability affect earnings.
Hedge accounting is discontinued prospectively when the hedge ceases to be highly effective. When
hedge accounting is discontinued, the cumulative gains or losses on the hedging instrument that has been
recognized in OCI is retained in other equity reserves until the hedged transaction impacts consolidated
profit or loss. When the forecasted transaction is no longer expected to occur, any net cumulative gains or
losses previously recognized in other equity reserves is immediately reclassified in the consolidated profit
or loss.
2.5.7 Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated
statements of financial position if, and only if, there is a currently enforceable legal right to offset the
recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the
liability simultaneously.
CREATE.WONDERFUL. 24
2.5.8.2 Financial Liability
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or
expired. On derecognition of financial liabilities, the difference between the carrying amount of the
financial liability derecognized and the sum of consideration paid and payable is recognized in the
consolidated profit or loss.
2.6 Inventories
Inventories are initially measured at cost. Subsequently, inventories are stated at the lower of cost and net
realizable value. The costs of inventories are calculated using the moving average method. Net realizable value
represents the estimated selling price less all estimated costs of completion and costs necessary to make the
sale.
When the net realizable value of the inventories is lower than the cost, the Globe Group provides for an
allowance for the decline in the value of the inventory and recognizes the write-down as an expense in the
consolidated profit or loss. The amount of any reversal of any write-down of inventories, arising from an
increase in net realizable value, is recognized as a reduction in the amount of inventories recognized as an
expense in the period in which the reversal occurs.
When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in
which the related revenue is recognized.
2.7 Prepayments
Prepayments represent expenses not yet incurred but already paid in cash. Prepayments are initially
recorded as assets and measured at the amount of cash paid. Subsequently, these are charged to profit or
loss as they are consumed in operations or expire with the passage of time.
Prepayments are classified in the consolidated statement of financial position as current assets when the
cost of goods or services related to the prepayments are expected to be incurred within one year.
Otherwise, prepayments are classified as non-current assets.
CREATE.WONDERFUL. 25
Group expects to use them during more than one period. Similarly, if the spare parts and servicing
equipment can be used only in connection with an item of property and equipment, they are accounted for
as property and equipment.
At the end of each reporting period, items of property and equipment are carried at cost less any subsequent
accumulated depreciation and impairment losses.
Subsequent expenditures relating to an item of property and equipment that have already been recognized
are added to the carrying amount of the asset when it is probable that future economic benefits, in excess
of the originally assessed standard of performance of the existing asset, will flow to the Globe Group. All
other subsequent expenditures are recognized as expenses in the period in which those are incurred.
Depreciation is computed on the straight-line method based on the estimated useful lives (EUL) of the
assets as follows:
Years
Telecommunications equipment:
Tower 20
Switch 7-10
Outside plant, cellsite structures and improvements 10-20
Distribution dropwires and other wireline asset 2-10
Cellular equipment and others 3-10
Buildings 20
Cable systems 5-20
Office equipment 3-7
Transportation equipment 3-5
Leasehold improvements are amortized over the shorter of their EUL of 5 years or the corresponding lease
terms.
The EUL of property and equipment are reviewed annually based on expected asset utilization of expected
future technological developments and market behavior.
Assets in the course of construction are carried at cost, less any recognized impairment loss. These are
transferred to the related property and equipment account when the construction or installation and the
related activities necessary to prepare the property and equipment for their intended use are complete, and
the property and equipment are ready for service. Depreciation of these assets, on the same basis as other
property and equipment, commences at the time the assets are ready for their intended use.
An item of property and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognized in the consolidated profit or loss.
CREATE.WONDERFUL. 26
2.10 Intangible Assets
Years
Software 3-10
Spectrum and franchise 10
Customer contracts 4
Merchant networks 4-21
CREATE.WONDERFUL. 27
Derecognition of Intangible assets
Intangible assets are derecognized upon disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognized in the consolidated profit or loss.
CREATE.WONDERFUL. 28
2.12 Impairment of Nonfinancial Assets
At the end of each reporting period, the Globe Group assesses whether there is any indication that any of
its tangible and intangible assets with finite useful lives may have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a
reasonable and consistent basis of allocation can be identified, assets are also allocated to individual cash-
generating units, or
otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognized as an expense. Impairment losses recognized in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the
carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
Impairment losses recognized in prior periods are assessed at the end of each reporting period for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been
a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortization, if no impairment loss had
been recognized. A reversal of an impairment loss is recognized as income. Impairment losses relating to
goodwill cannot be reversed in future periods.
2.13 Provisions
Provisions are recognized when the Globe Group has a present obligation, either legal or constructive, as a
result of a past event and it is probable that the Globe Group will be required to settle the obligation
through an outflow of resources embodying economic benefits, and the amount of the obligation can be
estimated reliably.
The amount of the provision recognized is the best estimate of the consideration required to settle the
present obligation at the end of each reporting period, taking into account the risks and uncertainties
surrounding the obligation. A provision is measured using the cash flows estimated to settle the present
obligation; its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from
a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be
received and the amount of the receivable can be measured reliably.
Provisions are reviewed at end of each reporting period and adjusted to reflect the current best estimate.
If it is no longer probable that a transfer of economic benefits will be required to settle the obligation, the
provision should be reversed.
CREATE.WONDERFUL. 29
2.13.1 Asset Retirement Obligation (ARO)
The net present value of legal obligations associated with the retirement of an item of property and
equipment that resulted from the acquisition, construction or development and the normal operation of
property and equipment is recognized in the period in which it is incurred. The retirement obligation is
initially measured at the present value of the estimated future dismantlement or restoration cost using
current market borrowing rates. Subsequently, the discount is amortized as interest expense.
CREATE.WONDERFUL. 30
The Globe Group recognizes revenues from the following sources:
Mobile services provided to subscribers at prepaid or postpaid arrangements such as Short
Messaging Services (SMS), voice, data communication, and other value added services (Note
2.15.1);
Wireline services provided to subscribers under subscription arrangements such as, voice,
corporate communication, and home broadband internet (Note 2.15.1);
Inbound traffic originating from other telecommunications providers that terminates at Globe
Group’s network (Note 2.15.2);
Inbound roaming due from foreign carriers (Note 2.15.3);
Postpaid wireless communication services bundled with sale of handsets and other devices (Note
2.15.4);
Postpaid wireline communication services bundled with equipment installation services (Note
2.15.5);
Leases, interests and management fees (Note 2.15.7).
2.15.4 Postpaid mobile services and sale of mobile handsets and other devices
The Globe Group provides postpaid wireless communication services which are bundled with sale of
mobile handsets and other devices. The postpaid wireless communication services and the sale of devices
are considered two separate performance obligations which are capable of being distinct and separately
identifiable. The Globe Group allocates the contract consideration between the two performance
obligations based on their corresponding relative stand-alone selling prices (SSP). The stand-alone selling
prices are determined based on the expected cost plus margin or adjusted market approach. The amount
allocated to the postpaid wireless communication service is recognized as service revenue over the period
of subscription. Any amount allocated to the sale of device is immediately recognized as non-service
revenue upon delivery of the item. Contract assets are recognized for the unbilled portion of the
consideration allocated to the sale of devices which are subsequently reduced as the monthly service fees
are billed to the subscribers.
CREATE.WONDERFUL. 31
The Globe Group does not make any adjustments for the significant financing component on contract
assets since it expects that the period between the delivery of the handset up to the date of its full settlement
will not exceed one year from the contract inception.
2.15.7.1 Interest
Interest income is recognized as it accrues using the effective interest rate method.
2.15.7.2 Lease
Lease income from operating lease is recognized on a straight-line basis over the lease term.
In a finance lease arrangement, the present value of the aggregate of the minimum lease receivable and any
unguaranteed residual value accruing to the Globe Group are immediately recognized as income.
CREATE.WONDERFUL. 32
Costs incurred to fulfill a contract are capitalized as deferred contract costs if all of the following
conditions are met:
The costs relate directly to a contract or to an anticipated contract that the Globe Group can
specifically identify;
The costs generate or enhance resources of the Globe Group that will be used in satisfying
performance obligation in the future; and
The costs are expected to be recovered.
CREATE.WONDERFUL. 33
Defined benefit costs are categorized as follows:
Service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements)
Net interest expense or income
Remeasurement
The Globe Group presents service cost and interest in the consolidated profit or loss in the line item
pension costs and finance cost, respectively. Curtailment gains and losses are accounted for as past
service costs.
The retirement benefit obligation recognized in the consolidated statements of financial position represents
the present value of the defined benefit obligation as reduced by the fair value of plan assets.
Plan assets are assets held by a long-term employee benefit fund. Plan assets are not available to the
creditors of the Globe Group, nor can they be paid directly to the Globe Group. Fair value of plan assets is
based on market price information.
CREATE.WONDERFUL. 34
2.19 Borrowing Costs
Borrowing costs are capitalized if these are directly attributable to the acquisition, construction or
production of a qualifying asset. Capitalization of borrowing costs commences when the activities for the
asset’s intended use are in progress and expenditures and borrowing costs are being incurred. Borrowing
costs are capitalized until the assets are ready for their intended use.
Borrowing costs include interest charges and other related financing charges incurred in connection with
the borrowing of funds, as well as exchange differences arising from foreign currency borrowings used to
finance these projects to the extent that they are regarded as an adjustment to interest costs.
Other borrowing costs are recognized as expense in the period in which these are incurred.
2.20 Leases
Lease Liabilities
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the Globe Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
Fixed lease payments (including in-substance fixed payments), less any lease incentives
receivable;
Variable lease payments that depend on an index or rate, initially measured using the index or rate at
the commencement date;
The amount expected to be payable by the lessee under residual value guarantees;
The exercise price of purchase options, if the lessee is reasonably certain to exercise the
options; and
Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option
to terminate the lease.
CREATE.WONDERFUL. 35
The lease liability is presented as a separate line in the consolidated statement of financial position. The
lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease
liability (using the effective interest method) and by reducing the carrying amount to reflect the lease
payments made.
The Globe Group remeasures the lease liability (and makes a corresponding adjustment to the related
right of use asset) whenever:
The lease term has changed or there is a significant event or change in circumstances resulting in a
change in the assessment of exercise of a purchase option, in which case the lease liability is
remeasured by discounting the revised lease payments using a revised discount rate.
The lease payments change due to changes in an index or rate or a change in expected payment
under a guaranteed residual value, in which cases the lease liability is remeasured by discounting
the revised lease payments using an unchanged discount rate (unless the lease payments change is
due to a change in a floating interest rate, in which case a revised discount rate is used).
A lease contract is modified and the lease modification is not accounted for as a separate lease, in
which case the lease liability is remeasured based on the lease term of the modified lease by
discounting the revised lease payments using a revised discount rate at the effective date of the
modification.
The Group did not make any such adjustments during the periods presented.
CREATE.WONDERFUL. 36
Current Income Tax
The current tax expense is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the consolidated statements of comprehensive income because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes items that are never taxable or
deductible.
CREATE.WONDERFUL. 37
2.23 EPS
Basic EPS is computed by dividing net income attributable to common stock by the weighted average
number of common shares outstanding, after giving retroactive effect for any stock dividends, stock
splits or reverse stock splits during the period.
Diluted EPS is computed by dividing net income attributable to common shareholders by the weighted
average number of common shares outstanding during the period, after giving retroactive effect for any
stock dividends, stock splits or reverse stock splits during the period, and adjusted for the effect of dilutive
options and dilutive convertible preferred shares. Outstanding stock options will have a dilutive effect
under the treasury stock method only when the average market price of the underlying common share
during the period exceeds the exercise price of the option. If the required dividends to be declared on
convertible preferred shares divided by the number of equivalent common shares, assuming such shares are
converted, would decrease the basic EPS, then such convertible preferred shares would be deemed dilutive.
Where the effect of the assumed conversion of the preferred shares and the exercise of all outstanding
options have anti-dilutive effect, basic and diluted EPS are stated at the same amount.
CREATE.WONDERFUL. 38
2.25 Operating Segment
The Globe Group’s major operating business units are the basis upon which the Globe Group reports its
primary segment information. The Globe Group’s business segments consist of:
(1) mobile communication services and (2) wireline communication services.
All operating segments’ operating results are reviewed regularly by the Group’s Chief Operating
Decision Maker (CODM) to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available. The Globe Group generally
accounts for intersegment revenues and expenses at agreed transfer prices.
CREATE.WONDERFUL. 39
In adopting PFRS 16, the Globe Group used the modified retrospective approach wherein the
cumulative effect of the initial application of the standards were recognized at January 1, 2019, and
the comparative periods were not restated. The Globe Group also applied transitional reliefs and
practical expedients for the measurements of lease liabilities and right of use assets arising from leases
previously classified as operating lease.
The following table shows the individual line items affected by the adjustments from the adoption of PFRS
16. Accounts not affected by the new standards are excluded in the presentation.
Operating lease for which the lease term ends within 12 months
As a practical expedient, the Globe Group did not recognize right of use assets and lease liabilities in
respect of leases previously classified as operating lease for which the lease term ends within 12
months from the date of initial application. Instead, these leases were accounted for in the same way
as short-term leases.
Lease liabilities
Lease liabilities amounting to ₱3,443.29 million in respect of leases previously classified as
operating leases were recognized in the consolidated statement of financial position at transition
date. The transition lease liabilities were measured using the present value of future lease
payments of the non-cancellable periods of the lease, discounted using the Globe Group’s
incremental borrowing rate at transition date.
CREATE.WONDERFUL. 40
Accrued long-term leases
Accrued long-term leases amounting ₱481.12 million at transition date arising from the straight- line
recognition of lease expense in respect of leases previously classified as operating leases were
derecognized in the statement of financial position with corresponding net of tax adjustment to retained
earnings and non-controlling interest amounting to ₱336.46 million and ₱0.51 million, respectively.
The lease liabilities as at January 1, 2019 can be reconciled to the operating lease commitments as of 31
December 2018, as follows:
CREATE.WONDERFUL. 41
3.2.4 PFRS 3 - Business Combinations
The amendments to PFRS 3 clarified that when an entity obtains control of a business that is a joint
operation, the entity applies the requirements for a business combination achieved in stages,
including remeasuring its previously held interest (PHI) in the joint operation at fair value. The PHI
to be remeasured includes any unrecognized assets, liabilities and goodwill relating to the joint
operation.
CREATE.WONDERFUL. 42
3.3.1 PFRS 10 and PAS 28 (amendments) Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
The amendments to PFRS 10 and PAS 28 deal with situations where there is a sale or contribution of assets
between an investor and its associate or joint venture. Specifically, the amendments state that gains or
losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with
an associate or a joint venture that is accounted for using the equity method, are recognized in the parent’s
profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture.
Similarly, gains and losses resulting from the remeasurement of investments retained in any former
subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) to
fair value are recognized in the
former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate
or joint venture.
The effective date of the amendments has yet to be set by the IASB; however, earlier application of the
amendments is permitted.
CREATE.WONDERFUL. 43
3.3.4 Amendments to References to the Conceptual Framework in IFRS Standards
Together with the revised Conceptual Framework, which became effective upon publication on March 28,
2018, the IASB has also issued Amendments to References to the Conceptual Framework in PFRS
Standards. The document contains amendments to PFRS 2, PFRS 3, PFRS 6, PFRS 14, PAS 1, PAS 8,
PAS 34, PAS 37, PAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32.
Not all amendments, however, update those pronouncements with regard to references to and quotes from
the framework so that they refer to the revised Conceptual Framework. Some pronouncements are only
updated to indicate which version of the Framework they are referencing to (the IASC Framework adopted
by the IASB in 2001, the IASB Framework of 2010, or the new revised Framework of 2018) or to indicate
that definitions in the Standard have not been updated with the new definitions developed in the revised
Conceptual Framework.
The amendments, where they actually are updates, are effective for annual periods beginning on or after
January 1, 2020, with early application permitted.
CREATE.WONDERFUL. 44
The following table shows the individual line items affected by the adjustments from the adoption of
PFRS 15 and 9. Accounts not affected by the new standards are excluded in the presentation.
4
Management’s Significant Accounting Judgments and Use of Estimates and
Assumptions
The preparation of the consolidated financial statements in conformity with PFRS requires management to
make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. The judgments, estimates and assumptions used in the consolidated
financial statements are based upon management’s evaluation of relevant facts and circumstances as of the
date of the consolidated financial statements. Actual results could differ from such judgments, estimates
and assumptions.
Judgments, estimates and assumptions are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
CREATE.WONDERFUL. 45
4.1.2 Contact Assets on Bundled Products
The Globe Group provides wireless communication services to subscribers which are bundled with
handset sales. Based on the Globe Group’s assessment, the performance obligations from the wireless
communication services and the sale of handsets are both capable of being distinct and separately
identifiable. Accordingly, the Globe Group allocates the total contract consideration to the two
performance obligations based on their corresponding relative SSP. Contract asset is recognized for
any unbilled amount allocated to the revenue from handset sales.
CREATE.WONDERFUL. 46
4.1.7 Financial Asset Business Model Assessment
Classification and measurement of financial assets depends on the results of the SPPI and the business
model test. The Globe Group determines the business model at a level that reflects how groups of financial
assets are managed together to achieve a particular business objective. This assessment includes judgement
reflecting all relevant evidence including how the performance of the assets is evaluated and their
performance measured, the risks that affect the performance of the assets and how these are managed and
how the managers of the assets are compensated.
Except for the derivative instruments, the Globe Group classified all of its non-equity instrument
financial assets as financial assets at amortized cost in accordance with the SPPI and business model test
requirements of PFRS 9.
CREATE.WONDERFUL. 47
4.2.3 Inventory Obsolescence and Market Decline
The Globe Group, in determining the NRV, considers any adjustment necessary for obsolescence which is
generally provided for nonmoving items after a certain period. The Globe Group adjusts the cost of
inventory to the recoverable value at a level considered adequate to reflect market decline in the value of the
recorded inventories. The Globe Group reviews the classification of the inventories and generally provides
adjustments for recoverable values of new, actively sold and slow-moving inventories by reference to
prevailing values of the same inventories in the market.
The amount and timing of recorded expenses for any period would differ if different estimates were utilized.
An increase in allowance for inventory obsolescence and market decline would decrease the profit for the
period, and decrease current assets.
Inventory obsolescence and market decline in 2019, 2018 and 2017 amounted to ₱713.72 million,
₱377.78 million and ₱403.04 million, respectively (see Note 9 and 28).
Inventories and supplies, net of allowances, amounted to ₱4,713.57 million and ₱4,854.94 million as of
December 31, 2019 and 2018, respectively (see Note 9).
4.2.4 ARO
The Globe Group recognizes ARO in relation to its obligations to bear the costs of dismantling the
constructed assets in leased properties and to restore such properties to the original condition at the end
of the lease period. The recognition of ARO requires the Globe Group to estimate the future restoration
and dismantling costs and determine the appropriate discount rate to be applied in the present value
calculation. The amount and timing of recorded expenses for any period would differ if different inputs
in the estimates were utilized. An increase in ARO would increase recorded expenses and increase
noncurrent liabilities.
As of December 31, 2019 and 2018, ARO amounted to ₱2,742.63 million and ₱2,523.94 million,
respectively (see Note 20).
4.2.5 EUL of Property and Equipment, Intangible Assets and Right of Use Assets
The useful life of each of the item of property and equipment, intangible assets and right of use assets
with finite useful lives is estimated based on the period over which the asset is expected to be available
for use. Such estimation is based on a collective assessment of industry practice, internal technical
evaluation and experience with similar assets and expected asset utilization based on future technological
developments and market behavior.
It is possible that future results of operations could be materially affected by changes in these estimates
brought about by changes in the factors mentioned. A reduction in the EUL of property and equipment,
intangible assets and right of use assets would increase the recorded depreciation and amortization
expense and decrease noncurrent assets.
The carrying amounts of property and equipment with finite useful lives amounted to
₱180,387.74 million and ₱167,118.98 million, as of December 31, 2019 and 2018, respectively (see Note
11).
The carrying amounts of intangible assets with finite useful lives amounted to
₱12,653.78 million and ₱12,558.02 million, as of December 31, 2019 and 2018, respectively (see
Note 12).
The carrying amounts of right of use assets amounted to ₱3,556.28 million as of December 31, 2019 (see
Note 13).
CREATE.WONDERFUL. 48
4.2.6 Impairment of Nonfinancial Assets Other Than Goodwill
The Globe Group performs an impairment review when certain impairment indicators are present.
Determining the recoverable amounts of property and equipment, intangible assets, right of use assets and
investments in associates and joint ventures requires the Globe Group to make estimates and assumptions
on the cash flows expected to be generated from those assets. While the Globe Group believes that the
assumptions are appropriate and reasonable, significant changes in the assumptions may materially affect
the assessment of recoverable values and may lead to impairment charges. Any resulting impairment loss
could have a material adverse impact on the financial position and results of operations.
The aggregate carrying value of property and equipment, intangible assets (excluding goodwill), right of use
assets and investments amounted to ₱233,356.45 million and ₱216,378.57 million as of December 31, 2019
and 2018, respectively (see Notes 11, 12, 13 and 15).
Impairment loss recognized on property and equipment amounted to ₱59.16 million, ₱61.74 million and
₱28.32 million in 2019, 2018 and 2017, respectively (see Note 28).
Impairment loss recognized on investment in associate amounted to nil in 2019 and 2018, and
₱286.04 million in 2017, respectively (Note 28).
CREATE.WONDERFUL. 49
4.2.9 Pension Benefits
The determination of the retirement obligation cost and retirement benefits is dependent on the selection
of certain assumptions used by independent actuaries in calculating such amounts. Those assumptions
include among others, discount rates and rates of compensation increase. Actual results that differ from
the assumptions are charged to other comprehensive income and therefore, generally affect the equity
and recorded obligation. While the Globe Group believes that the assumptions are reasonable and
appropriate, significant differences in the actual experience or significant changes in the assumptions
may materially affect the pension and other retirement obligations.
The net pension liability as of December 31, 2019 and 2018 amounted to ₱3,738.43 million and
₱1,459.46 million, respectively. Further details are provided in Note 29.2.
CREATE.WONDERFUL. 50
The fair value of the Globe Group’s investments in unquoted equity instruments classified as
financial assets at FVOCI amounted to ₱2,137.78 million and ₱1,442.94 million as of December 31,
2019 and 2018, respectively (see Note 16).
5
Cash and Cash Equivalents
Cash equivalents are short term highly liquid investments with insignificant risk of changes in value. The
cash and cash equivalents account consists of the following as of December 31:
2019 2018
(In Thousand Pesos)
Cash on hand and in banks ₱3,728,294 ₱2,018,910
Short-term money market placements 4,569,798 21,207,476
₱8,298,092 ₱23,226,386
CREATE.WONDERFUL. 51
The principal noncash transactions are as follows:
Cash flows from financing activities include non-cash change arising from foreign exchange gains or
losses and amortization of debt issue cost and others amounting to ₱1,269.98 million and
₱926.20 million in 2019 and 2018, respectively.
Unpaid cash dividends declared related to non-voting preferred stock amounted to ₱260.03 million
as at December 31, 2019 and 2018 (see Note 22.3).
6
Trade receivables - net
This account consists of receivables from:
₱21,138,950 ₱20,652,532
Trade receivables are noninterest-bearing and are generally due within twelve months.
Subscriber receivables arise from wireless and wireline voice, data communications and broadband
internet services provided by the Globe Group under postpaid arrangements.
Traffic settlement receivables are presented net of traffic settlement payables from the same carrier
(see Notes 33.2 and 35.1).
Others include trade receivables of non-telco subsidiaries and receivables from credit card companies.
CREATE.WONDERFUL. 52
The following is a reconciliation of the changes in the allowance for impairment losses for trade
receivables as of December 31:
Other Traffic
Key Corporate Corporations Settlements
Consumer Accounts and SME and Others Total
2018
December 31, 2017 ₱5,475,745 ₱1,934,247 ₱1,108,220 ₱613,399 ₱9,131,611
Transition adjustment (Note 3.4) 6,085,336 990,360 905,055 - 7,980,751
January 1, 2018 11,561,081 2,924,607 2,013,275 613,399 17,112,362
Charges for the period (Note 28) 2,244,503 458,421 252,343 17,078 2,972,345
Recoveries and write-offs – net (6,512,932) (121,898) (886,638) (40,352) (7,561,820)
7
Contracts with Customers
2019 2018
(In Thousand Pesos)
Contract assets ₱7,045,794 ₱7,124,332
Deferred contract costs 1,583,088 1,662,891
8,628,882 8,787,223
Less current portion of deferred contract costs 8,339,219 8,471,550
Noncurrent portion ₱289,663 ₱315,673
CREATE.WONDERFUL. 53
7.1.1 Contract Assets
The following table provides information about contract assets with customers:
The Globe Group provides wireless communication services to subscribers which are bundled with
sale of handsets and other devices. The Globe Group allocates the revenue based on the SSP of each
performance obligation. Contract assets are recognized for the unbilled portion of revenue allocated to
the sale of handset and other devices which will be reduced as the monthly service fees are billed to
the subscribers.
2019 2018
(In Thousand Pesos)
Cost to obtain contracts with customers:
Commissions ₱1,039,265 ₱1,140,838
Cost to fulfill contracts with customers
Installation costs 543,823 522,053
₱1,583,088 ₱1,662,891
CREATE.WONDERFUL. 54
Deferred contract costs are capitalized and subsequently amortized on a straight-line basis over the term of
the subscription contract. Movements in the deferred contract costs for the period are as follows:
2019 2018
(In Thousand Pesos)
Current
Deferred revenue from wireless subscribers under prepaid
arrangements ₱4,094,957 ₱3,280,864
Advance monthly service fees 2,937,868 2,903,529
Deferred revenue rewards 1,431,103 1,542,584
Contract liability from wireline services 241,419 307,101
Others 59,456 10,230
8,764,803 8,044,308
Noncurrent
Contract liability from wireline services 49,869 53,642
₱8,814,672 ₱8,097,950
The following table shows the roll forward analysis of contract liabilities:
Deferred revenues from wireless subscribers under prepaid arrangements are recognized as revenues
upon actual usage of airtime value, consumption of prepaid subscription fees or upon expiration of
the unused load value prepaid credit.
Advance monthly service fees represent advance collections from postpaid subscribers.
Deferred revenue rewards represent unredeemed customer award credit under customer loyalty
program.
Contract liability from wireline services represents collected upfront fees for equipment installation for
which revenues are recognized over the subscription period.
CREATE.WONDERFUL. 55
8
Derivative Financial Instruments
The Globe Group’s freestanding and embedded derivative financial instruments are accounted for as hedges
or transactions not designated as hedges. The table below sets out information about the Globe Group’s
derivative financial instruments and the related fair values as of December 31:
2019
USD PHP
Notional Notional Derivative Derivative
Amount Amount Assets Liabilities
(In Thousands)
Derivative instruments designated as hedges
Cash flow hedges
Cross currency swaps* $298,450 ₱- ₱205,290 ₱679,628
Principal only swaps** 97,700 - 217,622 53,016
Interest rate swaps 77,700 - 2,784 34,714
Derivative instruments not designated as hedges
Freestandng
Deliverable forwards* 82,000 - 1,259 13,273
Nondeliverable forwards* 30,000 - - 57,685
2018
USD PHP
Notional Notional Derivative Derivative
Amount Amount Assets Liabilities
(In Thousands)
Derivative instruments designated as hedges
Cash flow hedges
Cross currency swaps* $300,000 ₱- ₱1,787,777 ₱203,983
Principal only swaps** 86,400 - 528,297 32,010
Interest rate swaps 61,400 - 47,292 -
Derivative instruments not designated as hedges
Freestandng
Deliverable forwards 80,000 - - 75,661
The subsequent sections will discuss the Globe Group’s derivative financial instruments according to the
type of financial risk being managed and the details of derivative financial instruments that are categorized
into those accounted for as hedges and those that are not designated as hedges.
CREATE.WONDERFUL. 56
8.1 Derivative Instruments Accounted for as Hedges
The following sections discuss in detail the derivative instruments accounted for as cash flow hedges.
CREATE.WONDERFUL. 57
8.4 Fair Value Changes on Derivatives
The net movements in fair value changes of all derivative instruments are as follows:
2019 2018
(In Thousand Pesos)
At beginning of year ₱2,051,712 ₱735,341
Net changes in fair value of derivatives:
Designated as cash flow hedges (Note 22.6) (2,835,986) 1,178,226
Not designated as cash flow hedges (73,870) 839,763
(858,144) 2,753,330
Fair value of settled instruments 446,783 (701,618)
Details of amounts reclassified from cash flow hedge reserve to profit or loss in relation to hedge
accounting transactions are shown below.
9
Inventories and Supplies - net
This account consists of:
2019 2018
(In Thousand Pesos)
Handsets, devices and accessories ₱2,761,286 ₱2,977,904
Modem and accessories 844,518 972,523
Nomadic broadband device 498,380 371,976
Spare parts and supplies 420,142 357,161
SIM cards and SIM packs 133,530 156,940
Call cards and others 55,716 18,435
₱4,713,572 ₱4,854,939
CREATE.WONDERFUL. 58
Cost of inventories sold consists of:
10
Prepayment and Other Current Assets
This account consists of:
₱18,948,015 ₱16,254,796
The “Prepayments” account includes prepaid insurance, rent, maintenance, and licenses fees among
others.
Non-trade receivables – net consists of:
₱2,292,367 ₱1,458,503
Impairment loss related to non-trade receivable amounted to nil in 2019 and 2018, and ₱37.47 million
in 2017 (see Note 28).
CREATE.WONDERFUL. 59
Deferred input VAT pertains to VAT various purchases of goods and services which cannot be claimed yet
as credits against output VAT liabilities, pursuant to the existing VAT rules and regulations. Deferred input
VAT can be applied against future output VAT liabilities. Details are as follows:
₱1,357,031 ₱1,184,776
CREATE.WONDERFUL. 60
11
Property and Equipment – net
The rollforward analysis of this account follows:
2019
Buildings and
Telecommunication Leasehold Office Transportation Assets Under
Equipment Improvement Cable System Equipment Equipment Land Construction Total
Carrying amount at December 31 ₱110,421,555 ₱32,493,664 ₱9,372,693 ₱2,195,525 ₱1,045,651 ₱2,274,788 ₱24,858,652 ₱182,662,528
CREATE.WONDERFUL. 61
2018
Buildings and
Telecommunication Leasehold Transportation Assets Under
Equipment Improvement Cable System Office Equipment Equipment Land Construction Total
Carrying amount at December 31 ₱99,646,043 ₱29,932,873 ₱10,398,268 ₱2,752,296 ₱990,159 ₱2,274,788 ₱23,399,341 ₱169,393,768
CREATE.WONDERFUL. 62
Assets under construction include intangible components of a network system which are reclassified to depreciable
intangible assets only when assets become available for use (see Note 12).
Investments in cable systems include the cost of the Globe Group’s ownership share in the capacity of certain
cable systems under a joint venture or a consortium or private cable set-up and indefeasible rights of use (IRUs)
of circuits in various cable systems. It also includes the cost of cable landing station and transmission facilities
where the Globe Group is the landing party.
The costs of fully depreciated property and equipment that are still being used as of December 31, 2019 and
2018 amounted to ₱130,754.39 million and ₱105,431.91 million, respectively.
The Globe Group uses its borrowed funds to finance the acquisition of self-constructed property and equipment.
Borrowing costs incurred relating to these acquisitions were included in the cost of property and equipment
using 5.20% and 4.69% capitalization rates in 2019 and 2018, respectively. The Globe Group’s total capitalized
borrowing costs amounted to ₱1,251.52 million and ₱846.92 million in 2019 and 2018, respectively (see
Note19),
Pursuant to the Amended Rehabilitation Plan (ARP) and Master Restructuring Agreement (MRA), the
remaining outstanding restructured debt of BTI to creditors other than Globe Telecom amounting to USD1.7
million (Note 19.1) will be secured by a real estate mortgage on identified real property assets. The processing
of the real properties to be mortgaged is still ongoing as of December 31, 2019.
12
Intangible Assets and Goodwill - net
The rollforward analysis of this account follows:
2019
Total
Application Other Intangible
Software and Intangible Assets and
Licenses Goodwill Assets Goodwill
CREATE.WONDERFUL 63
2018
Total
Application Other Intangible
Software and Intangible Assets and
Licenses Goodwill Assets Goodwill
Other intangible assets consist of customer contracts, franchise, spectrum and merchant networks.
The Globe Group’s goodwill were recognized from acquisition of subsidiaries. Details of the Globe
Group’s goodwill are as follows:
The Globe Group conducts its annual impairment test of goodwill in the third fiscal quarter of each year. The
Globe Group considers the relationship between its market capitalization and its book value, among other
factors, when reviewing for indicators of impairment.
For impairment testing purposes, the Globe Group allocated the carrying amount of goodwill arising from the
acquisition of BTI to CGU of mobile communications services or wireless segment. The recoverable amount of
the CGU is determined based on value-in-use calculations using cash flow projections from business plans
covering a five-year period. The pre-tax discount rate applied to cash flow projections was 8.7% in 2019 and
cash flows beyond the five-year period are extrapolated using a 2% long-term growth rate in 2019. No
impairment loss on goodwill from acquisition of BTI was recognized in 2019 and 2018.
CREATE.WONDERFUL 64
The Globe Group has determined that the recoverable amount calculations are most sensitive to changes in
assumptions on gross margins, discount rates, market share, and growth rates.
In 2018, management determined that the recoverable amount of goodwill related to the acquisition of TAO
and Socialytics are less than its carrying value. Accordingly, the Globe Group recognized impairment loss
amounting to ₱140.40 million and ₱2.39 million, respectively (see Note 28).
No impairment loss on intangible assets was recognized in 2019. The management believes that any
reasonable possible change in the key assumptions on which recoverable amount is based would not cause the
aggregate carrying amount to exceed the aggregate recoverable amount of the CGU.
13
Lease Commitments
2019
(In Thousand Pesos)
Network sites ₱2,408,958
Transportation Equipment 610,316
Corporate Office 489,194
Stores 153,843
Leased lines 1,306
3,663,617
Less current portion 981,817
₱2,681,800
Interest expense on lease liabilities amounted to ₱272.17 million for the year ended December 31, 2019
(see Note 27).
CREATE.WONDERFUL 65
The table below presents the maturity profile of the Globe Group’s lease liabilities using undiscounted cash
flows of future lease payments.
Short-term leases and leases of low-value assets charged as operating expenses in the consolidated profit or loss
amounted to ₱5,793.30 (see Note 25). Payments of lease liabilities for the year ended December 31, 2019
amounted to ₱1,298.34 million.
14
Business Combinations
Amounts recognized on
acquisition
CREATE.WONDERFUL 66
Net cash outflow from the acquisition is as follows (in thousand pesos):
Amount recognized
on acquisition
CREATE.WONDERFUL 67
Net cash outflow from the acquisition is as follows (in thousand pesos):
The goodwill comprises the fair value of expected synergies arising from the acquisition and presented under
Goodwill and other intangible assets in the statements of the financial position (see Note 12). None of the
goodwill recognized is expected to be deductible for income tax purposes.
The fair value of the identifiable intangible assets is based on valuations performed by an independent appraiser
using acceptable valuation techniques within the industry. The application of a different set of assumptions or
technique could have a significant effect on the resulting fair value estimates.
15
Investments in associates and joint ventures
This account consists of the following as of December 31:
2019 2018
(In Thousand Pesos)
Investments in associates:
Yondu ₱- ₱940,236
Investments in joint ventures:
VTI, BAHC and BHC 32,755,463 32,481,947
GFI/Mynt 1,563,980 862,130
TechGlobal 90,893 89,702
Bridge Mobile Pte. Ltd (BMPL) 51,926 50,440
Konsulta 11,603 2,321
₱34,473,865 ₱34,426,776
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Details of the Globe Group’s investments in associate and joint ventures and the related percentages of
ownership as of December 31, 2019 and 2018 are shown below:
Country of
Incorporation Principal Activities 2019 2018
Associates
Yondu** Philippines Mobile content and application
development services 100% 49%
AFPI Philippines Construction and establishment of
systems, infrastructure - 20%
Joint Ventures
VTI Philippines Telecommunications 50% 50%
BAHC Philippines Holding company 50% 50%
BHC Philippines Holding company 50% 50%
Konsulta Philippines Health hotline facility 50% 50%
TechGlobal Philippines Installation and management of
data centers 49% 49%
GFI/Mynt* Philippines Holding company 46% 45%
BMPL Singapore Mobile technology infrastructure
and common service 10% 10%
*A subsidiary of Globe Telecom through GCVHI until September 2017 (see Note 15.4)
**An associate of Globe Telecom until September 2019 (Note 14.1)
Equity share in net loss from investment in associates and joint ventures are as follows:
Investment in associates and joint ventures share in other comprehensive income are as follows:
CREATE.WONDERFUL 69
CREATE.WONDERFUL 70
The table below presents the summarized financial information lifted from the unaudited statutory financial
statements of the Globe Group’s investments in associate and joint ventures:
VTI, BAHC
Yondu AFPI and BHC GFI/Mynt TechGlobal BMPL Konsulta
(In Thousand Pesos)
2019
Statements of Financial Position:
Current assets ₱681,643 ₱644,964 ₱3,622,452 ₱5,823,136 ₱96,739 ₱614,083 ₱53,321
Noncurrent assets 127,823 918,555 5,514,863 1,285,411 197,704 12,294 1,531
Current liabilities 346,904 418,396 2,793,061 6,161,631 80,136 106,914 31,342
Noncurrent liabilities - 267,873 448,702 61,241 28,811 203 304
Equity 462,562 877,250 5,895,552 885,675 185,496 519,260 23,206
Statements of Comprehensive
Income:
Revenue 89,200 65,129 3,338,561 5,341,656 58,836 297,243 77,770
Costs and expenses (18,027) (797,468) (2,011,962) (10,909,848) (55,260) (261,843) (83,939)
Income before tax 71,173 (732,339) 1,326,599 (5,568,192) 3,576 35,400 (6,169)
Income tax (5,356) - (460,328) (54,747) (1,146) - (267)
Profit (Loss) for the period ₱65,817 (₱732,339) ₱866,271 (₱5,622,939) ₱2,430 ₱35,400 (₱6,436)
2018
Statements of Financial Position:
Current assets ₱551,384 ₱585,163 ₱3,082,664 ₱2,664,868 ₱74,229 ₱608,627 ₱36,141
Noncurrent assets 71,581 1,450,681 4,050,389 931,800 217,996 22,076 517
Current liabilities 220,181 367,113 2,515,135 3,397,668 109,159 129,883 31,980
Noncurrent liabilities 5,871 267,042 659,097 173,057 - - 38
Equity 396,913 1,401,689 3,958,821 25,943 183,066 500,820 4,640
Statements of Comprehensive
Income:
Revenue 821,322 52,558 2,754,717 1,134,839 43,407 316,640 58,274
Costs and expenses (711,836) (659,777) (1,567,580) (3,800,622) (53,475) (296,078) (77,440)
Income before tax 109,486 (607,219) 1,187,137 (2,665,783) (10,068) 20,562 (19,166)
Income tax (31,409) - (367,505) 43,847 2,970 - -
Profit (Loss) for the period ₱78,077 (₱607,219) ₱819,632 (₱2,621,936) (₱7,098) ₱20,562 (₱19,166)
Investment in Associates
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15.2 Investment in AFPI (formerly Automated Fare Collection Service Inc. (AFCS))
On January 30, 2014, following a competitive bidding process, the Department of Transportation and
Communication awarded to AF Consortium, composed of AC Infrastructure Holdings Corp., BPI Card Finance
Corp., Globe Telecom, Inc., Meralco Financial Services, Inc., Metro Pacific Investments Corp., and Smart
Communications, Inc. the rights to design, build and operate the ₱1.72 billion automated fare collection
system. This is a public-private partnership project intended to upgrade and consolidate the fare collection
systems of the three urban rail transit systems which presently serve Metro Manila.
On February 10, 2014, AF Consortium incorporated AFCS, a special purpose company, which will assume the
rights and obligations of the concessionaire. These rights and obligations include the construction and
establishment of systems, infrastructure including implementation, test, acceptance and maintenance plans, and
operate the urban transit system for a period of 10 years.
On March 11, 2015, AFCS amended its corporate name to AFPI.
In 2019 and 2018, Globe Telecom infused additional capital amounting to nil and ₱60.00 million,
respectively.
In 2017, management determined that the recoverable amount of the investment in AFPI is less than the
carrying value. Accordingly, the Globe Group recognized as impairment loss as the difference in
the investment’s recoverable amount and carrying value amounting to ₱286.04 million (see Note 28). No
impairment loss was recognized in 2018 and 2019.
On July 22, 2019, Globe Telecom sold its interest in AFPI to Globe Fintech Innovations (GFI) for a total
consideration of ₱240.00 million which remained outstanding to date (see Note 5). Accordingly, gain on sale
from investment was recognized as other income (see Note 24). The Globe Group’s share in other
comprehensive income previously accumulated in other reserves account amounting to ₱1.1 million was also
reclassified to retained earnings (see Note 22.6).
The Globe Group has no share in any contingent liabilities of any associates as of December 31, 2019 and
2018.
CREATE.WONDERFUL 72
The acquisition provided Globe Telecom an access to certain frequencies assigned to Bell Tel in the 700 Mhz,
900 Mhz, 1800 Mhz, 2300 Mhz and 2500 Mhz bands through a co-use arrangement approved by the NTC on
May 27, 2016. NTC's approval is subject to the fulfillment of certain conditions including roll-out of telecom
infrastructure covering at least 90% of the cities and municipalities in three years to address the growing
demand for broadband infrastructure and internet access.
The memorandum of agreement between Globe and PLDT provides for both parties to pool resources and share
in the profits and losses of the companies on a 50%-50% basis with a view to being financially self-sufficient
and able to operate or borrow funds without recourse to the parties.
The Globe Group invested ₱51.2 million of additional capital in 2018.
CREATE.WONDERFUL 73
16
Other Noncurrent Assets
This account consists of:
₱4,013,910 ₱3,764,989
Others include investment properties with carrying amount of ₱19.92 million and ₱25.8 million as of
December 31, 2019 and 2018, respectively. Investment properties consist of building and improvements which
are held to earn rentals. Depreciation and amortization of investment properties amounted to ₱5.60 million,
₱10.02 million and ₱11.52 million in 2019, 2018 and 2017, respectively (see Note 26).
Fair value gain from investment in equity securities recognized in consolidated OCI amounted to
₱188.49 million, ₱170.65 million and ₱36.08 million in 2019, 2018 and 2017, respectively (see
Note 22.6).
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17
Trade Payables and Accrued Expenses
This account consists of:
₱56,979,315 ₱56,219,366
Traffic settlements payable are presented net of traffic settlements receivable from the same carrier (see Note
33.2).
Accrued expenses consists of the following:
2019 2018
(In Thousand Pesos)
Services ₱5,795,411 ₱4,552,753
Repairs and maintenance 4,165,209 4,163,652
Manpower 3,907,900 3,456,156
General, selling and administrative 3,687,094 2,957,088
Advertising 3,022,973 2,459,640
Lease 2,899,002 2,879,730
Utilities 1,274,691 967,624
Interest 725,251 933,734
₱25,477,531 ₱22,370,377
General, selling and administrative accrued expenses include travel, professional fees, supplies, commissions
and miscellaneous, which are individually immaterial.
18
Provisions
The rollforward analysis of this account follows:
CREATE.WONDERFUL 75
Provisions pertain to assumed liabilities related to the acquired interest in VTI, BAHC and BHC and various
pending unresolved claims over the Globe Group’s businesses such as provision for taxes, employee benefits,
onerous contracts and various labor cases. As of December 31, 2019 and 2018, Globe Telecom’s share in the
total assumed liabilities related to the acquired interest in VTI, BAHC and BHC amounts to ₱92.98 million.
The information usually required by PAS 37, Provisions, Contingent Liabilities and Contingent Assets, is not
disclosed as it may prejudice the outcome of these on-going claims and assessments. As of December 31, 2019, the
remaining claims are still being resolved.
19
Loans Payable
The table below shows the Globe Group’s short term credit facilities (in millions).
2019 2018
Uncommitted
Peso ₱16,350 ₱14,000
Dollar USD 93.9 USD 119
Committed
Peso ₱3,000 3,000
As of December 31, 2019 and 2018, the Globe Group has no long term credit facilities. The
Globe Group’s long-term debt consists of the following:
2019 2018
(In Thousand Pesos)
Term Loans:
Peso ₱106,697,990 ₱112,287,753
Dollar 22,200,060 23,556,854
128,898,050 135,844,607
Retail bonds 6,964,685 12,437,290
135,862,735 148,281,897
Less current portion (12,919,898) (16,758,196)
The maturities of long-term debt at nominal values as of December 31, 2019 follow (in thousands):
Due in:
2020 ₱12,951,649
2021 7,822,680
2022 14,835,657
2023 17,903,968
2024 and thereafter 82,896,115
₱136,410,069
CREATE.WONDERFUL 76
The interest rates and maturities of the above debts are as follows:
Unamortized debt issuance costs included in the above long-term debt as of December 31, 2019 and 2018
amounted to ₱547.33 million and ₱657.76 million, respectively.
Total interest expense recognized in the consolidated profit or loss related to long-term debt amounted to
₱5,937.70 million, ₱5,748.85 million and ₱4,776.24 million in 2019, 2018 and 2017, respectively (see
Note 27).
Total interest expenses capitalized as part of property and equipment amounted to ₱1,251.52 million and
₱846.92 million in 2019 and 2018, respectively (see Note 11).
CREATE.WONDERFUL 77
20
Other Long-term Liabilities
This account consists of:
CREATE.WONDERFUL 78
ARO represents Globe Group’s obligation to restore leased properties to their original condition and estimated
dismantling cost of property and equipment. The rollforward analysis of the Globe Group’s ARO follows:
Gain (loss) on settlement and remeasurement of ARO recognized in consolidated profit or loss amounted to
₱5.77 million, ₱27.89 million and (₱4.37 million) in 2019, 2018 and 2017, respectively (see Note 24).
21
Related Party Transactions
Parties are considered to be related to the Globe Group if they have the ability, directly or indirectly, to control
the Globe Group or exercise significant influence over the Globe Group in making financial and operating
decisions, or vice versa, or where the Globe Group and the party are subject to common control or common
significant influence. Related parties may be individuals (being members of key management personnel,
significant shareholders and/or their close family members) or entities and include entities which are under the
significant influence of related parties of the Globe Group where those parties are individuals, and post-
employment benefit plan which are for the benefit of employees of the Globe Group or of any entity that is a
related party of the Globe Group.
The Globe Group, in their regular conduct of business, enter into transactions with their major stockholders,
AC and Singtel, associates, joint ventures and certain related parties.
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The summary of balances arising from related party transactions for the relevant financial year follows (in thousands):
2019
Amount of transaction Outstanding Balance
CREATE.WONDERFUL 80
2018
Amount of transaction Outstanding Balance
Associate
Yondu 21.4 (46,340) 438,368 90,181 - 68,867 255,343 Interest-free, settlement in cash Unsecured, no impairment
CREATE.WONDERFUL 81
Amounts owed by related parties are presented in the statement of financial position as follows:
Amounts owed to related parties are presented in the statement of financial position as part of trade payable
ands and accrued expenses.
21.1 Entities with Joint Control over Globe Group - AC and Singtel
Globe Telecom has interconnection agreements with Singtel. Interconnection revenues and costs
recognized from the agreements with Singtel are as follows:
Globe Telecom and Singtel have a technical assistance agreement whereby Singtel will provide consultancy
and advisory services, including those with respect to the construction and operation of Globe Telecom’s
networks and communication services, equipment procurement and personnel services. In addition, Globe
Telecom has software development, supply, license and support arrangements, and maintenance cost
transactions with Singtel.
The outstanding balances due to Singtel arising from these transactions amounted to ₱55.88 million and
₱123.52 million as of December 31, 2019 and 2018, respectively.
Globe Telecom, Innove and BTI earn subscriber revenues from AC. Service revenues recognized from AC
amounted to ₱14.41 million, ₱31.36 million and ₱25.58 million in 2019, 2018 and 2017, respectively.
Globe Telecom reimburses AC for certain operating expenses. Total expense recognized by the Globe Group
from the transaction amounted to ₱64.37 million, ₱86.60 million and ₱37.35 million in 2019, 2018 and 2017,
respectively.
CREATE.WONDERFUL. 82
Joint Ventures in which the Globe Group is a venturer
BMPL
Globe Telecom has preferred roaming service contract with BMPL. Under this contract,
Globe Telecom will pay BMPL for services rendered by the latter which include, among others, coordination
and facilitation of preferred roaming arrangement among JV partners, and procurement and maintenance of
telecommunications equipment necessary for delivery of seamless roaming experience to customers. Globe
Telecom also incurs commission from BMPL for regional top-up service provided by the JV partners. The net
outstanding liabilities to BMPL related to these transactions amounted to ₱1.38 million and ₱0.35 million as of
December 31, 2019 and 2018, respectively. Total expenses recognized related to these transactions amounted
to ₱21.46 million,
₱20.70 million and ₱20.71 million in 2019, 2018, and 2017, respectively.
GFI/Mynt
The Globe Group renders certain management support services to GXI. The management services also include
the use of the Globe Group’s network and facilities to conduct GXI’s operations. Management fee income
amounted to ₱51.79 million in 2019 and 2018 (see Note 24).
The Globe Group also has a VAS sharing agreement with GXI. Under the agreement, GXI shall perform the
following services and shall be entitled to a certain percentage of data revenues arising from GCash
transactions:
(1) provide an e-commerce system (the application that drives the service) through which mobile wallets
get updated for each cash-in and cash-out transaction;
(2) provide cash-in and cash-out distribution channels for the remittance business through its partners (which
may include Globe Stores); and
(3) provide customer support.
GXI is also entitled to a certain percentage share for the airtime load purchased by the Globe Group’s
subscribers and Application Processing Interface (API) fees for the usage of GCash system in continuing
service of the various products and services of the Globe Group.
Total amount charged to consolidated profit and loss amounted to ₱322.05 million and ₱432.15 million
in 2019 and 2018, respectively.
CREATE.WONDERFUL 83
The Globe Group granted loans amounting to ₱250.00 million and ₱45.00 million to BHI at 5% interest which
matured on August 14, 2017. The ₱250.00 million loan is covered by a pledge agreement whereby in the event
of default, the Globe Group shall be entitled to offset whatever amount is due to BHI from any unpaid fees to
BEAM from the Globe Group. The ₱45.00 million loan is fully secured by a chattel mortgage agreement dated
December 21, 2009 between Globe Group and BEAM. Upon maturity, the loan was extended until August 14,
2020 with the interest rate increased to 5.75% per annum.
As of December 31, 2019 and 2018, the outstanding balance of loan receivable from BHI amounted to
₱108.62 million and ₱128.62 million, respectively. (Note 10 and 16). Interest income amounted to
₱6.47 million, ₱7.50 million and ₱7.84 million in 2019, 2018, and 2017, respectively (see Note 23).
On February 1, 2009, the Globe Group entered into a memorandum of agreement (MOA) with BEAM for the
latter to render mobile television broadcast service to Globe subscribers using the mobile TV service. The
Globe Group recognized expense amounting to ₱175.60 million in 2019 and
₱190.00 million in 2018 and 2017.
On October 1, 2009, the Globe Group entered into a MOA with Altimax for the Globe Group’s co-use of
specific frequencies of Altimax’s for the rollout of broadband wireless access to the Globe Group’s
subscribers. The Globe Group recognized expense amounting to ₱11.77 million in 2019 and
₱55.00 million in 2018 and 2017.
₱470,000 ₱383,900
CREATE.WONDERFUL. 84
There are no agreements between the Globe Group and any of its directors and key officers providing for
benefits upon termination of employment, except for such benefits to which they may be entitled under the
Globe Group’s retirement plans.
22
Equity and Other Comprehensive Income
Globe Telecom’s authorized capital stock as of December 31, 2019 and 2018 consists of (amounts in thousand
pesos and number of shares):
Shares Amount
Voting preferred stock - ₱5 per share 160,000 ₱800,000
Non-voting preferred stock - ₱50 per share 40,000 2,000,000
Common stock - ₱50 per share 148,934 7,446,719
Globe Telecom’s issued, subscribed and fully paid capital stock consists of:
2019 2018
Shares Amount Shares Amount
(In Thousand Pesos and Number of Shares)
Voting preferred stock 158,515 ₱792,575 158,515 ₱792,575
Non-voting preferred stock 20,000 1,000,000 20,000 1,000,000
Common stock 133,208 6,660,420 133,053 6,652,663
Below is the summary of the Globe Telecom’s track record of registration of securities:
CREATE.WONDERFUL 85
On August 8, 2014, the SEC approved the offer of non-voting preferred perpetual shares and on August
15, 2014, the 20 million non-voting preferred shares were fully subscribed and issued.
Subsequently, the shares were listed at the Philippines Stock Exchange (PSE) on August 22, 2014. Non-
voting preferred stock has the following features:
Issued at ₱50 par;
Dividend rate to be determined by the BOD at the time of issue;
Redemption - at Globe Telecom‘s option at such times and price(s) as may be determined by the BOD at
the time of issue, which price may not be less than the par value thereof plus accrued dividends;
Eligibility of investors - Any person, partnership, association or corporation regardless of
nationality wherein at least 60% of the outstanding capital stock shall be owned by Filipino;
No voting rights;
Cumulative and non-participating;
No pre-emptive rights over any sale or issuance of any share in Globe Telecom’s capital stock; and
Stocks shall rank ahead of the common shares and equally with the voting preferred stocks in the event of
liquidation.
CREATE.WONDERFUL 86
22.2 Common Stock
The rollforward of outstanding common shares follows:
2019 2018
Shares Amount Shares Amount
(In Thousand Pesos and Number of Shares)
At beginning of year 133,053 ₱6,652,663 132,917 ₱6,645,829
Exercise of stock options 10 499 7 371
Issuance of shares under share-
based compensation plan and
exercise of stock options 145 7,258 129 6,463
Holders of fully paid common stock are entitled to voting and dividends rights.
22.3 Cash Dividends
Information on the Globe Telecom’s BOD declaration of cash dividends follows:
Date
Dividends on Non-voting
Preferred stock:
May 9, 2017 13.00 260,030 August 10, 2017 August 22, 2017
December 5, 2017 13.00 260,030 January 26, 2018 February 22, 2018
May 4, 2018 13.00 260,030 August 10, 2018 August 22, 2018
December 6, 2018 13.00 260,030 January 28, 2019 February 22, 2019
May 3, 2019 13.00 260,030 July 26, 2019 August 22, 2019
December 10, 2019 13.00 260,030 January 29, 2020 February 24, 2020
Unpaid cash dividends declared related to non-voting preferred stock amounted to ₱260.03 million as of
December 31, 2019 and 2018 (see Note 17).
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22.4 Common Stock Dividend
The dividend policy of Globe Telecom as approved by the BOD is to declare cash dividends to its common
stockholders on a regular basis as may be determined by the BOD. On November 8, 2011, the BOD approved the
current dividend policy of Globe Telecom to distribute cash dividends at the rate of 75% to 90% of prior year's
core net income. On August 6, 2013, the BOD further approved the change in distribution from semi-annual
dividend payments to quarterly dividend distributions.
On November 5, 2018, the BOD approved the change in the dividend policy from 75% to 90% of prior year’s
core net income to 60% to 75% of prior year’s core net income, to be applied to the 2019 dividend declaration.
The dividend distribution policy is reviewed annually and subsequently each quarter of the year, taking into
account Globe Telecom's operating results, cash flows, debt covenants, capital expenditure levels and liquidity.
Remeasurement
Investment Currency on defined
Cash flow in equity translation benefit plan
hedges securities adjustment (Note 29.2) Total
CREATE.WONDERFUL 88
2018
Remeasurement
Investment in Currency on defined
Cash flow equity translation benefit plan
hedges securities adjustment (Note 29.2)
Total
(In Thousand Pesos)
As of January 1 ₱85,204 ₱141,874 ₱15,841 (₱595,294) (₱352,375)
Other comprehensive income for the
year:
Fair value changes 1,178,226 170,645 - - 1,348,871
Remeasurement gain on defined benefit
plan - - - 71,013 71,013
Transferred to profit or loss 55,653 - - - 55,653
Exchange differences - - 38,061 - 38,061
Share in OCI from investment in
associate (Note 15) - - 2,089 - 2,089
Income tax effect (370,164) (18,671) (11,626) (21,304) (421,765)
863,715 151,974 28,524 49,709 1,093,922
Reclassification of remeasurement
losses on defined benefit plans - - - (180,444) (180,444)
2017
Investment in Remeasurement
equity Currency on defined
Cash flow securities translation benefit plan
hedges (Note 16) adjustment (Note 29.2) Total
CREATE.WONDERFUL 89
23 Interest Income
Interest income is earned from the following sources:
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26 Depreciation and amortization
The account consists of:
27 Financing Costs
This account consists of:
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29 Staff Cost
This account consist of:
Number
of Fair Value
Options of Each
Date of or Option or Fair Value
Grant Grants Exercise Price Exercise Dates Grants Measurement
May 17, 604,000 1,270.50 per 50% of the options become 375.89 Trinomial
2007 share exercisable from May 17, 2009 option pricing
to May 16, 2017, the remaining model
50% become exercisable from
May 17, 2010 to May 16, 2017
August 1, 635,750 1,064.00 per 50% of the options become 305.03 Trinomial
2008 share exercisable from August 1, 2010 option pricing
to July 31, 2018, the remaining model
50% become exercisable from
August 1, 2011 to July 31, 2018
October 1, 298,950 993.75 per 50% of the options become 346.79 Trinomial
2009 share exercisable from October 1, option pricing
2011 to September 30, 2019, model
the remaining 50% become
exercisable from October 1,
2012 to September 30, 2019
The exercise price is based on the average quoted market price for the last 20 trading days preceding the
approval date of the stock option grant.
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A summary of the Globe Group’s ESOP activity and related information follows:
2019 2018
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Shares Price Shares Price
The average share prices at dates of exercise of the stock options in 2019, 2018 and 2017 amounted to
₱1,928.40, ₱1,704.96 and ₱1,014.42, respectively.
The following assumptions were used to determine the fair value of the stock options at effective grant
dates:
The expected volatility measured at the standard deviation of expected share price returns was based on
analysis of share prices for the past 365 days.
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The following are the stock grants to key executives and senior management personnel of the Globe Group
under the LTIP:
January 1, 2014 106,293 100% after 3 years subject to ₱1,630.35 Market price
attainment of plan targets and
subject to stock ownership
requirements
January 1, 2015 114,392 100% after 3 years subject to 1,738.30 Market price
attainment of plan targets and
subject to stock ownership
requirements
January 1, 2016 107,365 100% after 3 years subject to 1,904.95 Market price
attainment of plan targets and
subject to stock ownership
requirements
January 1, 2017 158,687 100% after 3 years subject to 1,428.85 Market price
attainment of plan targets and
subject to stock ownership
requirements
January 1, 2018 146,040 100% after 3 years subject to 1,782.80 Market price
attainment of plan targets and
subject to stock ownership
requirements
July 31, 2019 289,650 100% after 3 years subject to 1,997.35 Market price
attainment of plan targets and
subject to stock ownership
requirements
The fair value is based on the average quoted market price for the last 20 trading days preceding the approval
date of the stock option grant.
Cost of share-based payments in 2019, 2018 and 2017 amounted to ₱325.16 million, ₱236.71 million and
₱104.83 million, respectively.
CREATE.WONDERFUL 94
The BOT sets the investment policies and limits of the Plan, and appoints fund managers to assist in the
investment management of the Plan. The objective of the portfolio is capital preservation by earning higher
than regular deposit rates over a long period given a small degree of risk on principal interest.
Funding policy
The plan should have at least 100% solvency all levels at all times. If a solvency deficiency exists, the deficit
must be immediately funded.
Investment risk
The present value of the defined benefit plan liability is calculated using a discount rate determined by reference
to government bond yields; if the return on plan asset is below this rate, it will create a plan deficit.
Longevity risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the
mortality of plan participants both during and after their employment. An increase in the life
expectancy of the plan participants will increase the plan’s liability.
Salary risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan
participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.
The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation
were carried out at December 31, 2019 by an Independent Actuary. The present value of the defined benefit
obligation, and the related current service cost and past service cost, were measured using the projected unit
credit method.
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The components of pension expense (included in staff costs under “General, selling and administrative expenses”
account) in the consolidated statements of comprehensive income are as follows:
Components of defined benefit costs recognized in profit or loss 1,227,903 678,163 766,979
Remeasurement on the net defined benefit liability:
Return on plan assets
(excluding amounts included in net interest expense) (312,149) 515,908 2,337
Actuarial gains and losses:
from changes in assumptions 1,796,723 (892,818) (420,029)
from experience adjustments 471,975 305,897 (152,597)
Components of defined benefit costs recognized in other comprehensive
income (Note 22.6) 1,956,549 (71,013) (570,289)
The following tables present the changes in the present value of defined benefit obligation and fair value of
plan assets:
2019 2018
(In Thousand Pesos)
Balance at beginning of year ₱6,693,681 ₱6,635,722
Current service cost 523,152 593,326
Interest cost 489,592 369,988
Benefits paid (318,966) (318,434)
Remeasurements in other comprehensive income:
Actuarial gains and losses arising from changes in assumptions 1,796,723 (892,818)
Actuarial gains and losses arising from experience adjustments 471,975 305,897
Plan changes/ amendments 638,061 -
Effects of business combinations 14,513 -
Balance at end of year ₱10,308,731 ₱6,693,681
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Fair value of plan assets
2019 2018
(In Thousand Pesos)
The recommended contribution for the Globe Group retirement fund for the year 2020 amounted to
₱1,758.98 million. This amount is based on the Globe Group’s actuarial valuation report as of December
31, 2019.
The allocation of the fair value of the plan assets of the Globe Group as of December 31 is as follows:
2019 2018
(In Thousand Pesos)
Cash and cash equivalents ₱279,237 ₱248,624
Investment in debt securities 2,507,227 1,725,721
Investment quoted in equity shares 2,783,837 2,259,612
Investment in unquoted in equity shares 1,000,000 1,000,259
₱6,570,301 ₱5,234,216
The assumptions used to determine pension benefits for the Globe Group are as follows:
2019 2018
Discount rate 5.00% 7.50%
Salary rate increase 4.50% 4.50%
The assumptions regarding future mortality rates which are based on the 2017 Philippine Intercompany
Mortality Table which is based on a recent study by the Actuarial Society of the Philippines.
In 2019 and 2018, the Globe Group applied a single weighted average discount rate that reflects the estimated
timing and amount of benefit payments.
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The sensitivity analysis below has been determined based on reasonably possible changes of each significant
assumption on the defined benefit obligation as of December 31, 2019 and 2018, assuming all other
assumptions were held constant (in thousand pesos):
There were no changes from the previous period in the methods and assumptions used in preparing sensitivity
analysis.
The objective of the plan’s portfolio is capital preservation by earning higher than regular deposit rates over a
long period given a small degree of risk on principal and interest. Asset purchases and sales are determined by
the plan’s investment managers, who have been given discretionary authority to manage the distribution of
assets to achieve the plan’s investment objectives. The compliance with target asset allocations and
composition of the investment portfolio is monitored by the BOT on a regular basis.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit
obligation as it is unlikely that the changes in assumptions would occur in isolation of one another as some of
the assumptions may be correlated.
In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been
calculated using the Projected Unit Credit Method at the end of the reporting period, which is the same as that
applied in calculating the defined benefit obligation recognized in the consolidated statement of financial
position.
The plan contributions are based on the actuarial present value of accumulated plan benefits and fair value of
plan assets are determined using an independent actuarial valuation.
The average duration of the defined benefit obligation at the end of the reporting period is
16.73 years and 15.17 years in 2019 and 2018, respectively.
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Shown below is the maturity analysis of the undiscounted benefit payments as of December 31:
2019 2018
(In Thousand Pesos)
Within 1 year ₱397,936 ₱323,327
More than 1 year to 5 years 2,355,474 1,795,285
More than 5 years 4,689,956 3,521,929
₱7,443,366 ₱5,640,541
30 Income Tax
Net deferred tax assets and liabilities presented in the consolidated statements of financial position on a net
basis by entity are as follows:
2019 2018
(In Thousand Pesos)
Net deferred income tax assets* ₱1,866,591 ₱2,075,065
Net deferred income tax liabilities (Globe, GCVH, GTI and KVI) (5,057,641) (3,918,493)
The significant components of the deferred income tax assets and liabilities of the Globe Group represent
the deferred income tax effects of the following:
2019
Movements
Acquired
from a Other
business Profit or Comprehensive Other equity
2018 combination Loss Income item 2019
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2019
Movements
Acquired
from a Other
business Profit or Comprehensive Other equity
2018 combination Loss Income item 2019
Deferred tax assets
Inventory obsolescence
and market decline ₱158,722 ₱- ₱348 ₱- ₱- ₱159,070
Accrued rent expense under
PAS 17 144,298 - (144,145) - - 153
Contract liabilities 108,223 - (20,835) - - 87,388
Lease liabilities net of ROU - - 173,346 - (144,145) 29,200
MCIT 21,258 - (20,460) - - 798
NOLCO 556 - (463) - - 93
Others 36,427 (83,843) 104,168 - - 56,752
10,437,193 (80,403) (617,281) 587,420 (148,381) 10,178,547
Deferred tax liabilities
Excess of accumulated
depreciation and
amortization of Globe
Telecom equipment for (a)
tax reporting over (b)
financial reporting
(7,921,353) (145,514) (1,448,069) - - (9,514,936)
Undepreciated capitalized
borrowing costs already
claimed as deduction for
tax reporting
(1,076,544) - (98,667) - - (1,175,211)
Contract asset (2,330,482) - 32,922 - - (2,297,560)
Unrealized gain on
derivative transaction (615,513) - 218,912 520,009 - 123,408
Unrealized foreign
exchange gain (12,207) (1,759) (14,604) - - (28,570)
Unamortized discount on
noninterest bearing
liability (11,113) - (195) - - (11,308)
Others (313,408) (866) (128,042) (23,104) - (465,420)
(12,280,620) (148,139) (1,437,743) 496,905 - (13,369,597)
CREATE.WONDERFUL 100
2018
Movements
Other
Profit or Comprehensive Other equity
2017 Loss Income item 2018
Deferred tax assets
Allowance for impairment losses on
receivables ₱2,718,940 (₱1,401,898) ₱- ₱2,394,225 ₱3,711,267
Unearned revenues and advances
already subjected to income tax 1,504,476 462,600 - - 1,967,076
Accrued manpower cost 780,993 342,852 - - 1,123,845
Accrued pension 845,211 (9,643) (21,304) - 814,264
Unrealized foreign exchange losses 541,975 268,434 - - 810,409
ARO 661,388 39,939 - - 701,327
Provision for claims and assessment 314,759 190,960 - - 505,719
Cost of share-based payments 120,463 56,246 - (2,349) 174,360
Accumulated impairment losses on
property and equipment 141,496 17,946 - - 159,442
Inventory obsolescence and market
decline 184,780 (26,058) - - 158,722
Accrued rent expense under PAS 17 158,915 (14,617) - - 144,298
Contract liabilities - (8,286) - 116,509 108,223
MCIT - 21,258 - - 21,258
NOLCO 62,339 (61,783) - - 556
Others 74,686 (31,490) - (6,769) 36,427
8,110,421 (153,540) (21,304) 2,501,616 10,437,193
Deferred tax liabilities
Excess of accumulated depreciation and
amortization of Globe Telecom
equipment for (a) tax reporting over
(b) financial reporting
(6,478,641) (1,442,712) - - (7,921,353)
Undepreciated capitalized borrowing
costs already claimed as deduction for tax
reporting (1,231,218) 154,674 - - (1,076,544)
Contract asset - (121,791) - (2,208,691) (2,330,482)
Unrealized gain on derivative transaction (220,602) (24,747) (370,164) - (615,513)
Unrealized foreign exchange gain (7,329) (4,878) - - (12,207)
Unamortized discount on noninterest
bearing liability - (11,113) - - (11,113)
Others (159,831) (123,281) (30,297) - (313,409)
(8,097,621) (1,573,848) (400,461) (2,208,691) (12,280,621)
Net deferred income tax assets (liabilities) ₱12,800 (₱1,727,388) (₱421,765) ₱292,925 (₱1,843,428)
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The reconciliation of the provision for income tax at statutory tax rate and the actual current and deferred
provision for income tax follows:
Deferred tax assets of BTI on the following deductible temporary differences were not recognized since
Management believes that it will not be utilized for future taxable income:
2019 2018
(In Thousand Pesos)
Deferred tax assets on:
Allowance for impairment of assets ₱605,282 ₱605,282
Provision for probable loss 251,668 236,298
₱856,950 ₱841,580
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31 Earnings Per Share
The Globe Group’s earnings per share amounts were computed as follows:
CREATE.WONDERFUL 103
The risks are managed through the delegation of management and financial authority and individual
accountability as documented in employment contracts, consultancy contracts, letters of authority, letters of
appointment, performance planning and evaluation forms, key result areas, terms of reference and other policies
that provide guidelines for managing specific risks arising from the Globe Group’s business operations and
environment.
The Globe Group continues to monitor and manage its financial risk exposures according to its BOD
approved policies.
The succeeding discussion focuses on Globe Group’s capital and financial risk management.
CREATE.WONDERFUL 104
The following assumptions have been made in calculating the sensitivity analyses:
The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market
risks. This is based on the financial assets and financial liabilities held as of December 31, 2019 and 2018
including the effect of hedge accounting.
The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges for the
effects of the assumed changes in the underlying.
The assumed changes in market rates applied in the sensitivity analyses were based on historical
information and may not necessarily reflect the actual movements that may occur in the future periods.
2019 2018
USD fixed rate loans 57% 42%
PHP fixed rate loans 85% 87%
The loans receivable from related parties are subject to fixed interest rates and therefore not exposed to market
interest rate risk.
Due the short term maturities of cash and cash equivalents, its exposure to interest rate risk is not considered
to be significant.
CREATE.WONDERFUL. 105
The following tables demonstrate the sensitivity of income before tax to and equity a reasonably possible
change in interest rates after the impact of hedge accounting, with all other variables held constant.
Effect on income
Increase/ Decrease before income tax Effect on equity
in basis Points Increase (Decrease) Increase (Decrease)
2019 2018
US Peso US Peso
Dollar Equivalent Dollar Equivalent
(In Thousand Pesos)
Assets
Cash and cash equivalents $68,305 ₱3,470,052 $95,989 ₱5,045,457
Trade Receivables 83,492 4,241,541 100,211 5,267,417
151,797 7,711,593 196,200 10,312,874
Liabilities
Trade payable and accrued expenses 463,249 23,533,959 413,556 21,737,770
Loans payable 437,734 22,237,758 442,569 23,262,732
900,983 45,771,717 856,125 45,000,502
Net foreign currency - denominated
liabilities $749,186 ₱38,060,124 $659,925 ₱34,687,628
CREATE.WONDERFUL. 106
The following table demonstrates the sensitivity to a reasonably possible change in the PHP to USD exchange
rate, with all other variables held constant, of the Globe Group’s income before tax (due to changes in the fair
value of foreign currency-denominated assets and liabilities).
The movement in equity arises from changes in the fair values of derivative financial instruments
designated as cash flow hedges.
The Globe Group’s foreign exchange risk management policy is to maintain a hedged financial position,
after taking into account expected USD flows from operations and financing transactions. The Globe Group
enters into short-term foreign currency forwards and long-term foreign currency swap contracts in order to
achieve this target.
2019 2018
(In Thousand Pesos)
Cash and cash equivalents ₱8,298,092 ₱23,226,386
Trade receivables – net 21,138,950 20,652,532
Contract assets – net 7,045,794 7,124,332
Derivative assets 426,955 2,363,366
Loans receivable from related parties 656,620 726,620
Non-trade receivables* 1,635,747 1,458,503
₱39,202,158 ₱55,551,739
*2019 figure for non-trade receivable does not include current portion of loans receivable from related party.
The Globe Group has not executed any credit guarantees in favor of other parties.
CREATE.WONDERFUL. 107
Total subscribers' receivables and contracts assets ₱16,044,850 ₱4,521,018 ₱1,976,866 ₱8,973,405 ₱31,516,139
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Total subscribers' receivables and contracts assets ₱15,295,496 ₱4,908,323 ₱1,872,456 ₱8,973,405 ₱31,516,139
The Globe Group’s credit risk rating comprises the following categories:
High quality accounts are accounts considered to be of good quality, have consistently exhibited good
paying habits, and are unlikely to miss payments. High quality accounts primarily
include strong corporate and consumer accounts with whom the Globe Group has excellent payment
experience.
Medium quality accounts are accounts that exhibited good paying habits but may require minimal
monitoring with the objective of moving accounts to high quality rating. Medium quality accounts
primarily include subscribers whose creditworthiness can be moderately affected by adverse changes in
economic and financial conditions, but will not necessarily, reduce the ability of the subscriber to fulfill its
obligations. It includes customers with whom the Globe Group has limited experience and therefore,
creditworthiness needs to be further established over time.
Low quality accounts are accounts which exhibit characteristics that are identified to have increased
likelihood to miss payments. Low quality accounts are subject to closer monitoring and scrutiny with the
objective of managing risk and moving accounts to improved rating category. It primarily includes mass
consumer, corporate and SME customers whose creditworthiness are easily affected by adverse changes
in economic and financial conditions.
Terminated accounts are accounts in cancelled status. Although there is a possibility that terminated
accounts may still be collected by exhausting collection efforts, the probability of recovery has
significantly deteriorated.
CREATE.WONDERFUL 109
For traffic settlements and other trade receivables, the Globe Group uses delinquency and past due information
to analyze the credit risk. The tables below show the aging analysis of the Globe Group’s traffic settlements
and other trade receivables as of December 31, 2019 and 2018.
2019
2018
With respect to receivables from related parties, the exposure to credit risk is managed on a group basis.
For investments with banks and other counterparties, the Globe Group has a risk management policy which
allocates investment limits based on counterparty credit rating and credit risk profile. The Globe Group makes a
quarterly assessment of the credit standing of its investment counterparties, and allocates investment limits
based on size, liquidity, profitability, and asset quality. The usage of limits is regularly monitored.
For its derivative counterparties, the Globe Group deals only with counterparty banks with investment grade
ratings and large local banks. Credit ratings of derivative counterparties are reviewed quarterly.
Following are the Globe Group exposures with its investment counterparties for time deposits as of December
31:
CREATE.WONDERFUL. 110
2019 2018
Long-term committed ₱- ₱-
Short term
Committed ₱3,000 ₱3,000
Uncommitted
USD $93.9 $119
PHP ₱16,350 ₱14,000
As part of its liquidity risk management, the Globe Group regularly evaluates its projected and actual cash
flows. It also continuously assesses conditions in the financial markets for opportunities to pursue fund raising
activities, in case any requirements arise. Fund raising activities may include bank loans, export credit agency
facilities, and capital market issues.
The following tables show comparative information about the Globe Group’s financial instruments as of
December 31 that are exposed to liquidity risk and interest rate risk and presented by maturity profile including
forecasted interest payments for the next five years from December 31 figures.
Loans Payable
2019
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2018
Less than 1 year 1 to 3 years Over 3 years
Loans Payable (In Thousands)
Fixed Rate
USD notes $410 $1,493 $227
Philippine peso ₱11,110,000 ₱22,922,500 ₱72,427,500
Floating rate
USD notes $11,150 $235,850 $200,800
Philippine peso ₱5,040,000 ₱630,000 ₱13,160,000
Interest payable*
PHP debt ₱6,523,381 ₱16,834,502 ₱18,179,506
The following tables present the maturity profile of the Globe Group’s other liabilities and derivative
instruments (undiscounted cash flows including swap costs payments/receipts except for other long- term
liabilities) as of December 31, 2019 and 2018.
2019
Other Financial Liabilities
Less than 1 year 1 to 5 years Over 5 years Total
Derivative Instrument
CREATE.WONDERFUL 112
2018
Derivative Instrument
CREATE.WONDERFUL 113
33 Financial Assets and Liabilities
2019 2018
(In Thousand Pesos)
Financial Assets
Derivative assets:
Derivative assets designated as cash flow hedges (FVOCI) ₱425,696 ₱2,363,366
Derivative assets not designated as hedges (FVPL) 1,259 -
Financial assets at FVOCI:
Investment in equity securities - net 2,137,781 1,442,940
Financial assets at amortized cost
Cash and cash equivalents 8,298,092 23,226,386
Trade receivables – net 21,138,950 20,652,532
Contract assets – net 7,045,794 7,124,331
Non-trade receivables 1,635,747 1,458,503
Loans receivable from related parties 656,620 726,620
₱41,339,939 ₱56,994,678
Financial Liabilities:
Derivative liabilities
Derivative liabilities designated as cash flow hedges (FVOCI) ₱767,358 ₱235,993
Derivative liabilities not designated as hedges (FVPL) 70,958 75,661
Financial liabilities at amortized cost
Trade payables and accrued expenses* 52,663,918 51,540,513
Loans payable 135,862,735 148,281,897
Other long term liabilities** 962,079 1,383,807
₱190,327,048 ₱201,517,871
*Trade payables and accrued expenses do not include taxes payables which are not considered financial liabilities.
**Other long term liabilities do not include ARO and accrued pension which are not considered financial liabilities.
CREATE.WONDERFUL. 114
The Globe Group makes use of master netting agreements with counterparties with whom a significant volume
of transactions are undertaken. Such arrangements provide for single net settlement of all financial instruments
covered by the agreements in the event of default on any one contract. Master netting arrangements do not
normally result in an offset of balance sheet assets and liabilities unless certain conditions for offsetting under
PAS 32 apply.
Although master netting arrangements may significantly reduce credit risk, it should be noted that:
Credit risk is eliminated only to the extent that amounts due to the same counterparty will be settled
after the assets are realized; and
The extent to which overall credit risk is reduced may change substantially within a short period because
the exposure is affected by each transaction subject to the arrangement and fluctuations in market factors.
2019 2018
Carrying Fair Carrying Fair
Value Value Value Value
(In Thousand Pesos)
Financial Assets
Derivative assets1 ₱426,955 ₱426,955 ₱2,363,366 ₱2,363,366
Investment in equity securities1 2,137,781 2,137,781 1,442,940 1,442,940
Financial Liabilities
Derivative liabilities1 ₱838,316 ₱838,316 ₱311,654 ₱311,654
Loans payables 2 135,862,735 145,473,115 148,281,897 137,834,270
The following discussions are methods and assumptions used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate such value.
CREATE.WONDERFUL 115
CREATE.WONDERFUL. 116
Fair value measurement using
There were no transfers from Level 1 and Level 2 fair value measurements for the years ended December 31,
2019 and 2018. The Globe Group has no financial instruments classified under Level 3.
CREATE.WONDERFUL. 117
The Globe Group’s segment information is as follows (in thousand pesos):
2019
Mobile Wireline
Communications Communications
Services Services Consolidated
Cash Flows
Net cash from (used in):
Operating activities ₱64,828,975 ₱9,213,244 ₱74,042,219
Investing activities (46,034,742) (8,996,037) (55,030,779)
Financing activities (28,273,799) (4,983,554) (33,257,353)
CREATE.WONDERFUL. 118
2018
Mobile Wireline
Communications Communications
Services Services Consolidated
(In Thousand Pesos)
REVENUES:
Service revenues:
External customers:
Data ₱50,960,555 ₱11,761,929 ₱62,581,757
Voice 28,407,830 2,977,017 31,496,677
SMS 20,162,343 - 20,191,240
Broadband - 18,605,636 18,605,636
99,530,728 33,344,582 132,875,310
Nonservice revenues:
External customers 17,905,545 391,951 18,297,496
Cash Flows
Net cash from (used in):
Operating activities ₱41,727,279 ₱16,123,250 ₱57,850,529
Investing activities (33,616,425) (9,035,328) (42,651,753)
Financing activities 752,364 (4,187,410) (3,435,046)
CREATE.WONDERFUL. 119
2017
Mobile Wireline
Communications Communications
Services Services Consolidated
(In Thousand Pesos)
REVENUES:
Service revenues:
External customers:
Data ₱43,058,894 ₱10,287,868 ₱53,346,762
Voice 32,274,474 3,490,350 35,764,824
SMS 23,149,293 - 23,149,293
Broadband - 15,644,974 15,644,974
98,482,661 29,423,192 127,905,853
Nonservice revenues:
External customers 7,103,490 271,388 7,374,878
Segment revenues 105,586,151 29,694,580 135,280,731
EBITDA 46,412,954 6,912,717 53,325,671
Depreciation and amortization (14,719,797) (12,792,892) (27,512,689)
EBIT 31,693,157 (5,880,175) 25,812,982
NET INCOME (LOSS) BEFORE TAX 27,495,220 (5,953,518) 21,541,702
Provision for income tax (4,965,817) (1,491,672) (6,457,489)
CREATE.WONDERFUL. 120
The reconciliation of the EBITDA to income before income tax presented in the consolidated statements
of comprehensive income is shown below:
The reconciliation of core net income after tax (core NIAT) to NIAT is shown below:
CREATE.WONDERFUL. 121
34.1.1 Mobile communication voice net service revenues include the following:
Pro-rated monthly service fees on postpaid plans;
Charges for intra-network and outbound calls in excess of the consumable minutes for various Globe
Postpaid plans, including currency exchange rate adjustments (CERA) net of loyalty discounts credited
to subscriber billings;
Airtime fees for intra-network and outbound calls recognized upon the earlier of actual usage of the
airtime value or expiration of the unused value of the prepaid reload denomination (for Globe Prepaid
and TM) which occurs 365 days after activation of prepaid load credit net of
(i) bonus credits and (ii) prepaid reload discounts;
Revenues generated from inbound international and national long distance calls and
international roaming calls; and
Mobile service revenues of GTI.
34.1.2 Mobile SMS service revenues consist of local and international revenues from VAS such as
inbound and outbound SMS and MMS, and infotext, subscription fees on unlimited and bucket prepaid
SMS services, net of any payouts to content providers.
34.1.3 Mobile communication data net service revenues consist of local and international revenues from
value-added services such as mobile internet browsing and content downloading, mobile commerce services,
other add-on VAS net of payouts to content providers.
34.1.4 Globe Telecom offers its wireless communications services to consumers, corporate and small and
medium enterprise (SME) clients through the following three (3) brands: Globe Postpaid, Globe Prepaid and
Touch Mobile.
CREATE.WONDERFUL. 122
34.2.4 The Globe Group provides wireline voice communications (local, national and international long
distance), data and broadband and data services to consumers, corporate and SME clients in the Philippines.
Consumers - the Globe Group’s postpaid voice service provides basic landline services including toll-free
NDD calls to other Globe landline subscribers for a fixed monthly fee. For wired broadband, consumers
can choose between broadband services bundled with a voice line, or a broadband data-only service. The
Globe Group offers broadband packages bundled with voice, or broadband data-only service. For
subscribers who require full mobility, Globe Broadband service come in postpaid and prepaid packages
and allow them to access the internet via LTE, 3G with HSDPA, Enhanced Datarate for GSM Evolution
(EDGE), General Packet Radio Service (GPRS) or WiFi at hotspots located nationwide.
Corporate/SME clients - for corporate and SME enterprise clients wireline voice communication needs,
the Globe Group offers postpaid service bundles which come with a business landline and unlimited dial-
up internet access. The Globe Group also provides a full suite of telephony services from basic direct
lines to Integrated Services Digital Network (ISDN) services, 1-800 numbers, International Direct Dialing
(IDD) and National Direct Dialing (NDD) access as well as managed voice solutions such as Voice Over
Internet Protocol (VOIP) and managed Internet Protocol (IP) communications. Value-priced, high speed
data services, wholesale and corporate internet access, data center services and segment-specific solutions
customized to the needs of vertical industries.
CREATE.WONDERFUL. 123
35 Agreements and Commitments
CREATE.WONDERFUL. 124
35.4 Agreements with Huawei International, Pte. Ltd., Huawei Technology Co. Ltd and Huawei
Technology Phils.
In 2014, Globe Telecom and Innove engaged Huawei for a period of ten (10) years to perform the design,
engineering, manufacture, assembly and delivery of certain equipment and all its ancillary equipment and
related software and documentation, and to provide services, including subsequent training and technical
support, in an end-to-end full-turn key outcome based technical solution. Globe Telecom’s payments to Huawei
as of December 31, 2019 totaled ₱37,646.36 million for the services and ₱1,214.57 million and USD1,311.68
million for the equipment.
36 Contingencies
The Globe Group is contingently liable for various claims arising in the ordinary conduct of business and certain tax
assessments which are either pending decision by the courts or are being contested, the outcome of which are not
presently determinable. In the opinion of management and legal counsel, the possibility of outflow of economic
resources to settle the contingent liability is remote.
Interconnection Charge for Short Messaging Service
On October 10, 2011, the NTC issued Memorandum Circular (MC) No. 02-10-2011 titled Interconnection Charge
for Short Messaging Service requiring all public telecommunication entities to reduce their interconnection charge to
each other from ₱0.35 to ₱0.15 per text, which Globe Telecom complied as early as November 2011. On
December 11, 2011, the NTC One Stop Public Assistance Center (OSPAC) filed a complaint against Globe
Telecom, Smart and Digitel alleging violation of the said MC No. 02-10-2011 and asking for the reduction of SMS
off-net retail price from P1.00 to P0.80 per text. Globe Telecom filed its response maintaining the position that the
reduction of the SMS interconnection charges does not automatically translate to a reduction in the SMS retail
charge per text.
On November 20, 2012, the NTC rendered a decision directing Globe Telecom to:
Reduce its regular SMS retail rate from P1.00 to not more than ₱0.80;
Refund/reimburse its subscribers the excess charge of ₱0.20; and
Pay a fine of ₱200.00 per day from December 1, 2011 until date of compliance.
On May 7, 2014, NTC denied the Motion for Reconsideration (MR) filed by Globe Telecom last December 5,
2012 in relation to the November 20, 2012 decision. Globe Telecom’s assessment is that Globe Telecom is in
compliance with the NTC Memorandum Circular No. 02-10-2011. On June 9, 2014,
Globe Telecom filed petition for review of the NTC decision and resolution with the Court of Appeals (CA).
The CA granted the petition in a resolution dated September 3, 2014 by issuing a 60-day temporary restraining order
on the implementation of Memorandum Circular 02-10-2011 by the NTC. On October 15, 2014, Globe Telecom
posted a surety bond to compensate for possible damages as directed by the CA.
CREATE.WONDERFUL. 125
On June 27, 2016, the CA rendered a decision reversing the NTC’s abovementioned decision and resolution
requiring telecommunications companies to cut their SMS rates and return the excess amount paid by subscribers.
The CA said that the NTC order was baseless as there is no showing that the reduction in the SMS rate is mandated
under MC No. 02-10-2011; there is no showing, either that the present P1.00 per text rate is unreasonable and unjust,
as this was not mandated under the memorandum. Moreover, under the NTC’s own MC No. 02-05-2008, SMS is a
value added service (VAS) whose rates are deregulated. The respective motions for reconsideration filed by NTC
and that of intervenor Bayan Muna Party List (Bayan Muna) Representatives Neri Javier Colmenares and Carlos
Isagani Zarate were both denied.
The NTC thus elevated the CA’s ruling to the Supreme Court (SC) via a Petition for Review on Certiorari dated
September 15, 2017.
For its part, Bayan Muna filed its own Petition for Review on Certiorari of the CA’s Decision. On January 4, 2018,
Globe received a copy of the SC’s Resolution dated November 6, 2017, requiring it to comment on said petition of
Bayan Muna. Subsequently, on February 21, 2018, Globe received a copy of the SC’s Resolution dated December
13, 2017 consolidating the Petitions for Review filed by Bayan Muna and NTC, and requiring Globe to file its
comment on the petition for review filed by NTC. Thus, on April 2, 2018, Globe filed its Consolidated Comment on
both Bayan Muna and the NTC’s petitions for review. On September 18, 2018, Globe received a copy of Bayan
Muna’s Consolidated Reply to Globe’s Consolidated Comment and Digitel and Smart’s Comment.
Globe Telecom believes that it did not violate NTC MC No. 02-10-2011 when it did not reduce its SMS retail rate
from Php 1.00 to Php 0.80 per text, and hence, would not be obligated to refund its subscribers. However, if it is
ultimately decided by the Supreme Court (in case an appeal is taken thereto by the NTC from the adverse resolution
of the CA) that Globe Telecom is not compliant with said circular, Globe may be contingently liable to refund to its
subscribers the ₱0.20 difference (between ₱1.00 and ₱0.80 per text) reckoned from November 20, 2012 until said
decision by the SC becomes final and executory.
Management does not have an estimate of the potential claims currently.
CREATE.WONDERFUL. 126
On March 12, 2012, Globe and Innove elevated to the SC the questioned portions of the Decision and Resolution of
the CA dated December 28, 2010 and its Resolution dated January 19, 2012. The other service providers, as well as
the NTC, filed their own petitions for review. The adverse parties have filed their comments on each other’s
petitions, as well as their replies to each other’s comments. Parties were required to file their respective Memoranda
and Globe filed its Memorandum on May 25, 2018. The case is now submitted for resolution.
Acquisition by Globe Telecom and PLDT of the Entire Issued and Outstanding Shares of VTI
In a letter dated June 7, 2016 issued by Philippine Competition Commission (PCC) to Globe Telecom, PLDT,
SMC and VTI regarding the Joint Notice filed by the aforementioned parties on May 30, 2016, disclosing the
acquisition by Globe Telecom and PLDT of the entire issued and outstanding shares of VTI, the PCC claims that the
Notice was deficient in form and substance and concludes that the acquisition cannot be claimed to be deemed
approved.
CREATE.WONDERFUL. 127
On June 10, 2016, Globe Telecom formally responded to the letter reiterating that the Notice, which sets forth the
salient terms and conditions of the transaction, was filed pursuant to and in accordance with MC No. l6-002 issued by
the PCC. MC No. 16-002 provides that before the implementing rules and regulations for RA No. 10667 (the
Philippine Competition Act of 2015) come into full force and effect, upon filing with the PCC of a notice in which
the salient terms and conditions of an acquisition are set forth, the transaction is deemed approved by the PCC and as
such, it may no longer be challenged. Further, Globe Telecom clarified in its letter that the supposed deficiency in
form and substance of the Notice is not a ground to prevent the transaction from being deemed approved. The only
exception to the rule that a transaction is deemed approved is when a notice contains false material information. In
this regard, Globe Telecom stated that the Notice does not contain any false information.
On June 17, 2016, Globe Telecom received a copy of the second letter issued by PCC stating that
notwithstanding the position of Globe Telecom, it was ruling that the transaction was still subject for review.
On July 12, 2016, Globe Telecom asked the CA to stop the government's anti-trust body from reviewing the
acquisition of SMC's telecommunications business. Globe Telecom maintains the position that the deal was approved
after Globe Telecom notified the PCC of the transaction and that the anti-trust body violated its own rules by
insisting on a review. On the same day, Globe Telecom filed a Petition for Mandamus, Certiorari and Prohibition
against the PCC, docketed as CA-G.R. SP No. 146538. On July 25, 2016, the CA, through its 6th Division issued a
resolution denying Globe Telecom’s application for TRO and injunction against PCC’s review of the transaction. In
the same resolution, however, the CA required the PCC to comment on Globe Telecom's petition for certiorari and
mandamus within 10 days from receipt thereof. The PCC filed said comment on August 8, 2016. In said comment,
the PCC prayed that the ₱70.00 billion deal between PLDT-Globe Telecom and San Miguel be declared void for
PLDT and Globe Telecom’s alleged failure to comply with the requirements of the Philippine Competition Act of
2015. The PCC also prayed that the CA direct Globe Telecom to: cease and desist from further implementing its co-
acquisition of the San Miguel telecommunications assets; undo all acts consummated pursuant to said acquisition;
and pay the appropriate administrative penalties that may be imposed by the PCC under the Philippine Competition
Act for the illegal consummation of the subject acquisition. The case remains pending with the CA.
Meanwhile, PLDT filed a similar petition with the CA, docketed as CA G.R. SP No. 146528, which was raffled off
to its 12th Division. On August 26, 2016, PLDT secured a TRO from said court. Thereafter, Globe Telecom’s petition
was consolidated with that of PLDT, before the 12th Division. The consolidation effectively extended the benefit of
PLDT’s TRO to Globe Telecom. The parties were required to submit their respective Memoranda, after which, the
case shall be deemed submitted for resolution.
On February 17, 2017, the CA issued a Resolution denying PCC’s Motion for Reconsideration dated September 14,
2016 for lack of merit. In the same Resolution, the Court granted PLDT’s Urgent Motion for the Issuance of a Gag
Order and ordered the PCC to remove the offending publication from its website and also to obey the sub judice rule
and refrain from making any further public pronouncements regarding the transaction while the case remains
pending. The Court also reminded the other parties, PLDT and Globe, to likewise observe the sub judice rule. For
this purpose, the Court issued its gag order admonishing all the parties “to refrain, cease and desist from issuing
public comments and statements that would violate the sub judice rule and subject them to indirect contempt of
court. The parties were also required to comment within ten days from receipt of the Resolution, on the Motion for
Leave to Intervene, and Admit the Petition-in Intervention dated February 7, 2017 filed by Citizenwatch, a non-stock
and non- profit association.
CREATE.WONDERFUL. 128
On April 18, 2017, PCC filed a petition before the SC docketed as G.R. No. 230798, to lift the CA's order that has
prevented the review of the sale of San Miguel Corp.'s telecommunications unit to PLDT Inc. and Globe Telecom.
On April 25, 2017, Globe filed before the SC a Motion for Intervention with Motion to Dismiss the petition filed
by the PCC.
As of June 30, 2017, the SC did not issue any TRO on the PCC's petition to lift the injunction issued by the CA.
Hence, the PCC remains barred from reviewing the SMC deal.
On July 26, 2017, Globe received the SC en banc Resolution granting Globe's Extremely Urgent Motion to
Intervene. In the same Resolution, the Supreme Court treated as Comment, Globe's Motion to Dismiss with
Opposition Ad Cautelam to PCC's Application for the Issuance of a Writ of Preliminary Injunction and/or TRO.
On August 31, 2017, Globe received another Resolution of the SC en banc, requiring the PCC to file a Consolidated
Reply to the Comments respectively filed by Globe and PLDT, within ten (10) days from notice. Globe has yet to
receive the Consolidated Reply of PCC since the latter requested for extension of time to file the same.
In the meantime, in a Decision dated October 18, 2017, the CA, in CA-G.R. SP No. 146528 and CA-G.R. SP No.
146538, granted Globe and PLDTs Petition to permanently enjoin and prohibiting PCC from reviewing the
acquisition and compelling the PCC to recognize the same as deemed approved. PCC elevated the case to the SC
via Petition for Review on Certiorari.
Co-use of frequencies by PLDT/Smart and Globe Telecom as a result of the acquisition of controlling shares in VTI
On January 21, 2019, Globe filed its Comment to a petition filed by lawyers Joseph Lemuel Baligod and
Ferdinand Tecson before the Supreme Court, against the NTC, PCC, Liberty Broadcasting Network, Inc., (LBNI),
Bell Telecommunications Inc. (BellTel), Globe, PLDT and Smart, docketed as G.R. No. 242353. The petition
sought to, among others, enjoin PLDT/Smart and Globe from co-using the frequencies assigned to LBII and
BellTel in view of alleged irregularities in NTC’s assignment of these frequencies to these entities. In its
Comment, Globe argued that the frequencies were assigned in accordance with existing procedures prescribed by
law and that to prevent the use of the frequencies will only result to its being idle and unutilized. Moreover, in
view of the substantial investments made by Globe, for the use of these frequencies, enjoining its use will cause
grave and irreparable injury not only to Globe but to subscribers who will be deprived of the benefits of fast and
reliable telecommunications services. The other Respondents have likewise filed their respective Comments to the
petition.
37 NTC Regulation
On February 8, 2019, the RA 11202 or the “Mobile Number Portability Act” was signed into law. The act
allows subscribers to change their subscription plans or service providers and still keep their current mobile
numbers. Moreover, no interconnection fee or charge shall be imposed for domestic calls and SMS made by a
subscriber. This act shall take effect fifteen days after its publication in the Official Gazette or in any
newspaper of general circulation.
Within ninety (90) days from the effectivity of the act, NTC shall coordinate with the Department of
Information and Communications Technology, The National Privacy Commission, the Philippine
Competition Commission, and other concerned agencies, and promulgate rules and regulations and other
issuances to ensure the effective implementation of the Act. Within six (6) months from the promulgation of
the rules and regulations, service providers shall comply with the provisions of the act and set up a
mechanism for the purpose of implementing nationwide.
CREATE.WONDERFUL. 129
CREATE.WONDERFUL. 130
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GLOBE TELECOM, INC. AND SUBSIDIARIES
Index to the Consolidated Financial Statements and Supplementary Schedules Schedule 1 -
Schedule of all the effective standards and interpretations as of December 31, 2019 Schedule 2 -
Schedule 4 - Map of the relationships of the companies within the Group Schedule 5 -
CREATE.WONDERFUL. 1
Schedule 1
SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS UNDER THE
PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS)
DECEMBER 31, 2019
CREATE.WONDERFUL. 2
PHILIPPINE FINANCIAL REPORTING STANDARDS
Adopted Not Not
AND INTERPRETATIONS
Adopted Applicable
CREATE.WONDERFUL. 3
PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not
INTERPRETATIONS Adopted Applicable
CREATE.WONDERFUL. 4
PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not
INTERPRETATIONS Adopted Applicable
CREATE.WONDERFUL. 5
PHILIPPINE FINANCIAL REPORTING STANDARDS
Adopted Not Not
AND INTERPRETATIONS
Adopted Applicable
Underlying Assets
Amendment to PAS 12: Recognition of Deferred Tax 🗸
Assets for Unrealized Losses
CREATE.WONDERFUL. 6
PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not
INTERPRETATIONS Adopted Applicable
Plans
PAS 27 Separate Financial Statements 🗸
(Amended)
Amendments to PAS 27: Transition Guidance and 🗸
Investment Entities
Amendments to PAS 27: Equity Method in Separate 🗸
Financial Statements
CREATE.WONDERFUL. 7
PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not
INTERPRETATIONS Adopted Applicable
PAS 41 Agriculture 🗸
Philippine Interpretations
IFRIC 1 Changes in Existing Decommissioning, Restoration
and Similar Liabilities 🗸
CREATE.WONDERFUL. 8
PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not
INTERPRETATIONS Adopted Applicable
IFRIC 21 Levies 🗸
IFRIC 22 Foreign Currency Transactions and Advance
Consideration 🗸
CREATE.WONDERFUL. 9
PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not
INTERPRETATIONS Adopted Applicable
No. 2011-03 PIC Q&A No. 2015-01 and PIC Q&A No. 2018-13]
PIC Q&A Costs of Public Offering of Shares [Amended by PIC
No. 2011-04 Q&A No. 2018-13] 🗸
CREATE.WONDERFUL. 10
PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not
INTERPRETATIONS Adopted Applicable
CREATE.WONDERFUL. 11
PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not
INTERPRETATIONS Adopted Applicable
CREATE.WONDERFUL. 12
Schedule 2
FINANCIAL SOUNDNESS INDICATORS December 31 December 31
2019 2018
FINANCIAL RATIOS
Interest Coverage Ratio 9.53 9.34
Debt to Equity (D/E Ratio) 1.68 2.03
Total Asset to Equity Ratio 3.75 4.09
Current Ratio 0.73 0.86
Solvency Ratio 0.27 0.23
PROFITABILITY MARGINS
EBITDA Margins 51% 49%
Net Profit Margin 15% 14%
Return on Equity 29% 27%
CREATE.WONDERFUL. 13
Schedule 3
Items Amount
(In thousands)
Unappropriated Retained Earnings, beginning ₱18,824,996
Adjustments (8,221,965)
Unappropriated Retained Earnings, as adjusted, beginning 10,603,031
Net income during the period closed to Retained Earnings 20,855,819
Less: Non-actual/unrealized income net of tax
Unrealized foreign exchange gain net of previously recognized accumulated
(1,229,343)
unrealized loss reversed during the year
Unrealized fair value loss on derivative financial instruments during the year to the
297,132
extent of previously recognized accumulated unrealized gain
Deferred tax assets realized during the year 139,222
Net income actually earned/realized during the period 20,062,830
Add (Less):
Dividend during the period (12,688,158)
Effects of transition adjustments 294,350
Forfeiture of stock options 9,884
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Schedule 4
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Schedule 5
SCHEDULE OF PREFERRED SHARES OFFERING PROCEEDS AS OF DECEMBER 31, 2019
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SCHEDULE 6A – FINANCIAL
ASSETS DECEMBER 31, 2019
Number of shares
or principal Amount shown Income
Name of Issuing entity and association of each amount of bonds in the balance received and
issue and notes sheet accrued
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SCHEDULE 6B – Amounts Receivable from Directors, Officers, Employees, Related Parties and principal Stockholders (Other than Related parties)
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Application Software and Licenses ₱11,366,882 ₱32,852 ₱48,532 (₱5,549,460) ₱5,352,483 ₱- ₱11,251,289
Goodwill 1,140,248 1,759,071 - - - - 2,899,319
Other Intangible Assets 1,191,139 453,040 - (241,690) - - 1,402,489
Total Intangible Assets and Goodwill ₱13,698,269 ₱2,244,963 ₱48,532 (₱5,791,150) ₱5,352,483 ₱- ₱15,553,097
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₱12,919,897,506 ₱122,942,837,118
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SCHEDULE 6F – INDEBTEDNESS TO RELATED PARTIES (LONG-TERM LOANS FROM
RELATED COMPANIES
DECEMBER 31, 2019
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SCHEDULE 6G – GUARANTESS OF SECURITIES OF OTHER ISSUERS
DECEMBER 31, 2019
Name of issuing
entity of Amount
securities owned by
guaranteed by the Title of issue of Total amount person for
company for each class of guaranteed which this
which this securities and statement is Nature of
statement is filed guaranteed outstanding filed guarantee
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SCHEDULE 6H - CAPITAL
STOCK DECEMBER 31, 2019
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Aging Analysis of Accounts Receivable
The table below shows the aging analysis of the Globe Group's trade receivables as of December 31, 2019.