Globe Telecom looks to digitalisation of Filipinos' lifestyles to drive growth

Singapore

GLOBE Telecom has seen a surge in investor optimism in recent months, with its stock rising by some two-thirds in value between August and September.

Shares of Globe closed on Friday (Oct 29) at 2,996 pesos each, up 47.6 per cent this year, giving the company a market capitalisation of 400.32 billion pesos (S$10.68 billion).

Much of the market enthusiasm appears to have been driven not by its core telecoms business but by developments at Mynt, a fintech company in which Globe has a 40 per cent stake.

In January, Mynt reportedly closed a funding round that valued it at nearly US$1 billion. And, on Aug 9, the company announced it had turned a profit for the first time since its founding in 2015.

Mynt's mobile payments app GCash has over 48 million registered users, and is on track to hit 3 trillion pesos in gross transaction value this year. That is about 3 times its 2020 transaction value of over 1 trillion pesos.

According to Globe's executive director, president and chief executive Ernest Cu, the service is so popular that GCash is used as a verb to describe peer-to-peer money transfers in the Philippines - the same way Google has become a verb to mean searching online.

More Filipinos use GCash rather than bank accounts, Cu added. According to the Bangko Sentral ng Pilipinas 2019 Financial Inclusion Survey - the latest available edition of a biennial survey by the country's central bank - only 29 per cent of the adult population had a bank account. Yet 60 per cent of Filipino adults are on GCash, Cu said. With the app, they can access financial services such as savings, investments, insurance and credit.

In the past, a farmer who lived in a more remote area would need to walk, take a tricycle or ride a jeepney to a nearby utility office to pay a bill in cash.

These days, he visits a neighbourhood store to top up his GCash account and pay his bills. As a user of GCash, he can also get loans at lower rates because the service can generate a credit score for him.

"It's no different from a city-based middle class (person), just that in this case we do it at scale and we do it to the bottom of the pyramid," Cu said.

Cu credits the pandemic with helping to break the inertia.

"People are more willing to try new things now because they have no choice at the moment. And when they try it, it becomes a 'wow' moment," he noted.

Leveraging strengths

The Mynt investment is one of many Globe has made in digital solutions and services. Globe has also invested in numerous startups through its venture capital arm, 917Ventures.

Cu said Globe's investment focus has been on potential solutions to problems plaguing Filipinos, such as the low doctor-to-population ratio in the Philippines as well as a lack of online grocery shops.

He also considers whether Globe's strengths can be leveraged to build the tools necessary to solve such problems. With the data it has about who its customers are, he believes the company is in a good position to help startups dive into the consumer industry and potentially become unicorns.

One such example is KonsultaMD, a telemedicine membership service. The latest available data from The World Bank showed the Philippines had 0.6 physicians for every 1,000 people in 2017. Telemedicine is widely viewed as one potential solution to this low doctor-patient ratio.

KonsultaMD's service gives users round-the-clock access to licensed doctors over the phone or through video calls. Its cheapest monthly plan costs 60 pesos - less than the price of a typical fast-food meal - and provides unlimited voice consultations with a doctor, and 1 video consultation per month.

Over the past year, KonsultaMD has seen a 202 per cent increase in consultations and a 140 per cent increase in doctors partnering the service to serve its 1.6 million registered users.

Another example is e-grocery platform PureGo, a joint venture with supermarket chain Puregold. Plans have been made to expand the service to areas outside of Metro Manila.

Both KonsultaMD and PureGo live within an ecosystem tied together by GCash and the Globe network.

To pay for services on KonsultaMD, customers can choose to use credit cards or one of Globe's services - whether GCash, Globe's postpaid billing system, or prepaid credits. Those on the Globe Rewards loyalty platform also get discounts and perks. Earlier this year, Globe Rewards offered customers free delivery on PureGo.

Building a resilient network

Of course, the resilience of this ecosystem of digital services also depends on the reliability of Globe's network.

Cu said the company continues to invest in expanding its mobile and fibre networks. Globe is expected to have 1.4 million fibre lines by the end of the year, up from just 600,000 a year ago and 50,000 lines in 2019.

Globe is also paying attention to developments in 5G technology, although Cu does not see it as an immediate need for consumers today.

It presents a "separate highway" through which the company can redirect heavy and high-end users' data, he said. He believes businesses will likely take advantage of 5G's low latency and higher bandwidth to support concurrent users on the network.

In any case, investments in faster mobile networks are not as likely to get investors excited about Globe's stock as investments in mobile apps and digital services. Cu said he has been sometimes frustrated by the market's lack of appreciation for Globe's potential to build on its user base in the same way many digital startups do.

"We always get excited about social media as a platform, or search as a platform, right?" he added. "But why is no one excited about telcos as a platform when it has the reach, the capital and the data about consumers with which to start a business?"

If Globe can unlock value from its other investments in the same way it has done at Mynt, perhaps investor sentiment about the company will continue to improve.