Globe sheds strategic shift from telco giant to tech innovator

The Philippines’ widening healthcare gap and poor sustainability initiatives open Globe CEO Ernest L. Cu’s eyes to an opportunity.

Globe’s strategic shift from telecommunications giant to an all-around technology innovation company is one that sheds light on the alarming healthcare gap in the country.

“Healthcare… is a very big problem. Six out of 10 Filipinos have never seen a doctor because there’s just no access to healthcare or health information for that matter,” Globe CEO Ernest L. Cu told Asia Telecom.

“The environment is also a big problem, with pollution taking over major metros in the Philippines. These are the kind of things we [in Globe] want to solve,” he continued when he obliged to an interview with magazines that included the Singapore Business Review and Asian Business Review at the recent Singapore Fintech Festival 2023.
 
According to a study by the Philippine Institute for Development Studies (PIDS), the state-run Philippine Health Insurance Corporation (PhilHealth) and its stakeholders should prioritise increasing accredited hospital beds in Luzon and Mindanao, the regions with the lowest patient-bed ratio.

The study analysed PhilHealth’s facility coverage from 2018 to 2021, emphasising the widespread challenge of insufficient hospital beds in the country. Whilst some regions meet the recommended bed-to-population ratio, Luzon and Mindanao urgently need attention, especially in the wake of the COVID-19 pandemic.

The study also highlighted healthcare service trends and noted a disparity in hospital capacity, particularly in poorer provinces. Efforts to increase bed capacity are concentrated in provinces with 85% or higher population coverage, irrespective of poverty levels.

The institute strongly recommended the coordinated efforts by PhilHealth and the Philippine health department to implement reforms and enhance healthcare service delivery. Additionally, it suggested expanding services in provinces with low primary healthcare facilities and improving access to primary care in regions with low bed capacity and high admission rates. 

More than just telecommunications

The transformation, aimed at addressing the maturation of the telco business, has seen Globe’s market share grow significantly over the years.

Cu detailed the strategic initiatives, emphasising the creation of 917 Ventures to tackle national issues and enhance financial inclusion.

Cu highlighted the maturing telco industry and the need for Globe to diversify its offerings beyond traditional services. “We missed the boat during the 4G era, allowing global tech giants to leverage our network infrastructure for significant shareholder value. We asked ourselves, why not us? The answer was clear; it should be us,” he said retrospectively.

To address national challenges, Globe established 917Ventures, a dedicated entity focusing on solutions for Filipinos. Cu stressed the importance of identifying problems first and then leveraging technology to solve them.

Financial inclusion and access to healthcare were cited as critical areas where Globe has made substantial strides, particularly through the scale-up of its electronic money platform.

Future trends: Human health and environmental wealth

With healthcare and sustainability in mind, Cu said he believes these will become Globe’s upcoming strengths. He then detailed plans to grow Globe’s healthcare initiatives in the near term, particularly with KonsultaMD – its online medical consultation platform.

“We started out with a very basic data consultation. Of course, consultation leads to a prescription. And we have that now, and we have now the delivery of the pharmacy goods. And then next will be a referral to labs,” Cu said. “We may start our own lab or refer you to a lab. And then soon, referral to hospitals. So it’s come full circle.”

Globe is also committed to being an ESG-focused entity, with plans to cut its carbon footprint significantly. The promotion of electric vehicles, exemplified by the recent launch of Gogoro, aligns with the company’s commitment to addressing environmental challenges.

Back in April 2023, Globe’s subsidiaries 917Ventures, Ayala Corporation, and Gogoro Inc. launched Gogoro Smartscooters and battery-swapping in the Philippines. These entities aim to expand the country’s venture to energy-efficient transportation.

Harnessing group synergies for subsidiary growth

What is now the techco witnessed a 44% year-on-year increase in Globe’s non-telco revenues, reaching P4.1b in the first nine months, to which Cu emphasised the advantages of harnessing group synergies, with many businesses relying on initial collaborations with Globe. He underscored the difficulty of replacing telco revenue but highlighted the wide moat around the new ventures, making them challenging for competitors to emulate.

“In principle, there was no telco service that came in early that wasn’t difficult, like anything else, it should be. If it was easy, then it would be easily replicated. What we’re seeing also is that the businesses we’re creating have a very wide moat around it, you cannot easily get into it. Many have tried. You can see that no one has been able to approach GCash in terms of scale. GCash is in equilibrium with its growing revenues and profits, while others are growing its revenues and losses. It’s a very different set of economics,” Cu pressed.

When asked about a recent 12% decline in revenue growth, Cu downplayed it as short-term fluctuations, emphasising the patience required to build sustainable businesses. He expressed the challenges of quarterly reporting for a public company and the need to focus on long-term goals rather than immediate financial indicators.

Yet, it stands firm when it comes to its customer-centric approach. “We focus on understanding what consumers need on a daily basis, what adds value to their lives. GCash is a prime example; it started with buying loads and evolved into a multifaceted platform based on user needs,” Cu explained.

The future is balanced just right for Globe

Looking into the future, Cu outlined Globe’s long-term plans which include stabilising the telecommunications business, maintaining profitability, and reducing capex. The focus is on balancing capex, income, dividend payouts, and borrowings whilst leveraging Globe’s platform to experiment and build new businesses.

Cu articulated his vision as institutionalising the experimentation and scaling processes within Globe.

“I think we’ve got a terrific platform — I think one of a kind in the Philippines. Others may have the assets, while we have the people. But as you can see, our people are very much geared towards this mindset, having worked with me for the last 15 years. It’s really just trying to get to what I’ve done and multiply that many times. It takes experimentation, the ability to scale and the build-out of new businesses. And hopefully, it’s just not me doing it in the future.” Cu concluded.