Moody's rates Globe Telecom

Moody's Investors Service said it assigned a Ba2 rating to Globe Telecom Inc.'s proposed $100 million bond issuance due 2012. The outlook is negative, which reflects the negative outlook for Philippines sovereign foreign currency rating.

At the same time, Moody's has affirmed Globe's Ba1 local currency senior implied and senior unsecured issuer ratings with stable outlook. The actions follow the company's announcement that it is reopening its existing 2012 bond by issuing the additional $100 million.

Moody's said Globe's ratings reflect the following key credit strengths: 1) a stable cellular industry structure with two dominant operators, one of which is Globe; 2) ongoing growth evident in the Philippines cellular industry and from which Globe will clearly stand to benefit; 3) healthy profitability and free cash flow, with moderating capex requirements; (4) a strong financial profile with debt/EBITDA of 2.0x, RCF/debt of 37% and interest coverage of 3.8x in fiscal 2003.

Challenges include: 1) Globe's exposure to an inherently volatile regional economy together with the challenges of servicing foreign currency debt obligations with cash flow primarily denominated in Peso; 2) the risks associated with the political and economic uncertainty evident in the Philippines; 3) Moody's expectation that Globe will in the future increase its dividend payments and share buyback so that overall leverage is expected to rise; 4) Globe is expanding into provincial areas with lower ARPUs per customer and raising capital expenditure to increase the pace of its cell site roll-outs.

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