Has Globe Telecom found a digital services sweet spot?

• Rather than go it alone in digital payments, Globe Telecom, the largest mobile operator in the Philippines, hooked up with a partner, Mynt
• It attracted additional investors to help with strategic and financial support 
• Globe is a happy minority shareholder in a booming fintech firm that is delivering increasingly healthy profit contributions to its bottom line 

The global telecom industry is in general agreement that digital services provision should play an important role in the telco business mix because traditional telco connectivity services, it seems, can only get you so far, while (in theory at least) 21st century digital services are capable of driving much-needed profitability as well as meaningful customer engagement.

The question is, what form should that digital services involvement take? Should telcos hold their digital services close to their chests and run them as just another part of the telecom business? Or should they involve a cloud or retail partners to do some of the things telcos are not yet good at?

Importantly, if partners are needed, what form should the relationship take and what might work best for all parties?

Philippines telco Globe Telecom provided some answers to those questions in 2017 when it first formed a partnership with budding Philippines fintech firm Mynt to spin out its then successful, but undeveloped, GCash online payments system. 

Under the arrangement, Mynt became the parent company of GCash, overseeing its operations and guiding its technical development. The move also brought in important shareholders to lend strategic direction, provide new routes to market and technical support and, most of all, new equity investment for the platform.

And following another investment round last August, Mynt’s stakeholders currently comprise: Globe, with a 34% stake; China’s Ant Group, which holds about 34% of the company; Philippine conglomerate Ayala Corporation, with a 13% share; and Mitsubishi UFJ Financial Group [MUFG], Japan’s largest banking group, with an 8% stake.

Globe hoped the initial move to merge Gcash with Mynt would spark financial improvement for Globe by ensuring that the equity returns from its Mynt holding would more than offset the potential direct revenue loss theoretically incurred by hiving off a majority stake in GCash.

So far, the results for Globe’s strategy have been impressive. Globe’s end-of-year results for 2024 reflected a positive impact from its digital services holding, with its share in Mynt’s equity earnings hitting a record 3.8bn Filipino pesos ($65.7m), a 59% increase on the previous year, helping Globe to add positively to its bottom line from its diversified income stream. As a result of that increase, the income from Mynt was equal to 12% of Globe’s full year net profit before tax, up from a 7% contribution in 2023. 

Meanwhile the traditional telecoms part of Globe’s business, in part bolstered by Mynt’s market success and profile, held steady or marginally improved. Over the course of 2024, for instance, Globe’s corporate data revenues surged by 11% to 20.4bn pesos ($352m) and mobile revenues by 4% to 116.7bn pesos ($2bn) which, taken together with losses in other areas – in particular the contraction of its earnings in broadband – meant that consolidated gross service revenues grew by just 2% compared to 2023 numbers to hit a total of 165bn pesos ($2.85bn). Given the headwinds blowing on its traditional services business – Globe cites inflation and the impact of “devastating typhoons” that affected consumer spending as factors that weighed heavily on its revenues –  the 2% rise can be considered a relative success.

“Our 2024 revenues reflect the strength of our data-driven strategy and the growing demand for mobile and corporate data services. By continuing to enhance our network and expand our customer base, we are well positioned to sustain this growth into 2025 and beyond,” said Ernest Cu, president and CEO of Globe.

Mynt, now considered Globe’s fintech arm, has maintained its own upward momentum as the dominant cashless ecosystem in the Philippines, according to Globe, with GCash the preferred platform for digital financial services and in control of the largest network of online and offline merchants and social sellers in the Philippines (more than 6 million partners, the operator claims).

In addition GCash now offers payments in 51 countries through GCash Global Pay in partnership with Alipay+. The company is eyeing opportunities to further capitalise on its position in the booming Philippines fintech sector by expanding its online presence with other apps and services.

So what can a service spin-out offer a telco?

Going by the Globe Telecom example, and adding a dollop of luck and canny partnerships, quite a lot, it seems.

For the time being at least, Mynt is delivering a stream of net profit gains on top of Globe’s sprawling telecom business. Globe’s financial performance has been boosted by Mynt’s equity earnings and share valuation, plus Mynt’s market leadership in fintech has opened up possibilities for future growth.

Mynt, in turn, benefits from access to Globe’s significant customer base – it is the largest telco in the Philippines, with 60.9 million mobile customers at the end of 2024, up by 7% from 2023’s total. It’s still early days, of course, and such digital services operations are not a guaranteed success, but things do look promising for this service spin-out.

– Ian Scales, Contributing Editor, TelecomTV