Globe Telecom: Navigating Regulatory Crosscurrents in a Telecom Transformation

The Philippine telecommunications sector is at a crossroads. On one side, Globe Telecom (GLO: Philippine Stock Exchange) and its peers face regulatory headwinds, compliance costs, and competitive pressures from disruptors like DITO Telecommunity. On the other, the sector is poised for long-term growth driven by 5G adoption, IoT expansion, and digital infrastructure investments. For investors, the question is clear: Can Globe mitigate near-term risks while capitalizing on its structural advantages?

Near-Term Risks: Regulatory Compliance and Market Pressure

Globe's immediate challenges stem from two key factors:
1. SIM Registration Act Compliance: The 2022 law mandates all users to register SIM cards with biometric and ID data. While 67.83% of SIMs were registered by mid-2023, non-compliance risks include permanent deactivation of unregistered SIMs. This creates operational complexity for Globe, which must balance customer retention with regulatory enforcement.

1. Competitive Intensity: DITO Telecommunity, a new entrant backed by tycoon Henry Sy, has aggressively captured market share. With 14 million subscribers by late 2024 (up from 9 million in 2023), DITO's 140 MHz of 5G spectrum—double that of Globe—threatens Globe's dominance. DITO's pricing strategy, bundled services, and superior 5G speeds (ranked fastest in the Philippines by Opensignal in 2023) have pressured Globe's margins and subscriber growth.

The National Telecommunications Commission (NTC) has further complicated matters by proposing stricter rules, such as in-person SIM registration, to combat fraud. While Globe has complied with existing mandates (e.g., real-time deactivation of unregistered SIMs), the cost of compliance—both financial and reputational—is non-trivial.

Long-Term Catalysts: 5G, IoT, and Infrastructure Leverage

Despite these challenges, Globe's long-term prospects are bolstered by structural tailwinds:
1. 5G Leadership: While DITO's spectrum advantage is notable, Globe holds 60 MHz of 5G spectrum, sufficient to support high-speed services in urban and strategic rural areas. Its 252 5G-ready base stations in Mindanao (deployed by 2022) and plans to expand fiber-optic networks (e.g., migrating from copper wires) position it to capture the $5.58 billion Philippine telecom market's 3.28% CAGR (2025–2033).

1. Untapped IoT Opportunities: The Philippines' IoT market is nascent but growing, with applications in agriculture, logistics, and smart cities. Globe's partnerships (e.g., with DISHA for AI-driven disaster response and GoTyme for fraud prevention) suggest a strategic pivot toward enterprise IoT services—a high-margin segment with minimal competition from DITO.

2. Underutilized Assets: Globe's fiber-optic infrastructure and spectrum holdings are undervalued in current stock pricing. For instance, its PHP 15–20 billion annual capex (vs. DITO's PHP 15–20 billion in 2024) reflects an ability to scale efficiently without the debt burden that has plagued DITO (which reported a net loss of PHP 11.05 billion in early 2023).

Peer Analysis: Globe vs. Smart vs. DITO

Metric	Globe Telecom	Smart Communications	DITO Telecommunity
Subscriber Base (2024)	60.2 million	60.3 million	14 million (up from 9M in 2023)
Market Position	Established leader	Established leader	Rapidly growing challenger
5G Spectrum (MHz)	60	60	140 (dominant share)
Financial Health	Stable/profitable	Stable/profitable	Operating at a loss (2023–2024)
Key Strengths	Broad network, enterprise focus	Fiber dominance, brand loyalty	Aggressive pricing, 5G speed

Investment Thesis: Buy the Dip, but Mind the Headwinds

Globe's stock offers asymmetric upside if it can:
1. Mitigate regulatory costs: Streamline SIM registration processes and leverage partnerships (e.g., government ID systems) to reduce compliance friction.
2. Defend market share: Accelerate 5G deployment in high-value urban areas and expand IoT services to offset DITO's price competition.
3. Monetize underused assets: Leverage its fiber-optic network and spectrum for enterprise contracts, which have higher margins than consumer services.

Risks to Consider:
- NTC's proposed in-person registration could strain operations and alienate low-income users.
- DITO's aggressive growth could force price wars, squeezing margins.

Final Take

Globe Telecom is sailing through choppy regulatory waters but has the infrastructure and scale to weather near-term storms. Its long-term growth hinges on two actions: executing on 5G/IoT monetization and adapting to evolving compliance regimes without sacrificing customer trust. For investors, the stock's current valuation—trading at 12x 2025E earnings (vs. DITO's negative multiples)—presents a compelling entry point. However, patience is required: the next 12–18 months will test Globe's ability to navigate these crosscurrents.

Investment Grade: Hold with a cautiously bullish bias for those willing to endure short-term volatility for long-term telecom leadership.