Globe (PSE:GLO), a leading digital platform in the Philippines with major interests in telecommunications, financial technology, digital marketing solutions, venture capital funding for startups, corporate venture building, virtual healthcare, and providing support to entertainment, announced today that it obtained Board approval for its milestone initiative to sell over 7,000 towers, of which 66% are located in Luzon, 19% in Mindanao and 15% in Visayas. The tower assets up for sale are made up of 79% ground-based towers and 21% rooftop towers and have been grouped into 3 unique distinct portfolios assigned to three different tower companies representing local and international groups with deep experience and expertise in telecom tower infrastructure, and engineering and construction. Upon completion, this transaction will represent the largest ever tower sale and leaseback deal in the country.
Globe expects to raise a significant amount of capital over the next few quarters from executing this transaction. Of the total proceeds, approximately 75% will be used to fund capital expenditures, support ongoing network expansion, and sustain industry-leading network consistency and reliability scores. The balance of 25% will be earmarked to cover our 2023 debt servicing requirements. This will significantly improve the overall health of Globe's balance sheet and provide sufficient flexibility to properly compete in this dynamic market as well as further expand its digital ecosystem.
As the biggest milestone of this initiative, Globe signed 2 sale and leaseback agreements for 2 portfolios consisting of 5,709 telecom towers and related passive telecom infrastructure for over P71 billion.
The first portfolio being sold consists of 2,180 telecom towers in Luzon, which will be acquired by MIESCOR Infrastructure Development Corporation (MIDC) for a total consideration of ~P26 billion, and leased back to Globe for an initial period of 15 years. This longer lease tenor provides Globe with more stability and certainty with regard to the use of these passive infrastructures, which is critical to its core telco service. The first close for this portfolio is targeted to happen within the 3rd quarter of the year, with subsequent closings happening as and when closing conditions are met. Globe estimates the pre-tax transaction gain from this first portfolio to be P10.6 billion, reporting and recognition of which will be according to the timing of the transaction closings.
The second portfolio consisting of 3,529 towers will be sold to Frontier Tower Associates Philippines Inc. (Frontier Towers) for P45 billion, and also leased back over an initial period of 15 years. The first closing target for this portfolio is targeted to happen in the late 3rd quarter, with subsequent closings happening as and when closing conditions are met. Globe estimates the pre-tax transaction gain for this portfolio to be P15.0 billion, reporting and recognition of which will be according to the timing of the transaction closings, which will be on a staggered basis.
Globe is also in advanced discussion with one other tower company for the potential sale and leaseback of an additional ~1,350 telecom towers and related passive telecom infrastructure. This last portfolio is made up of towers located in Visayas and Mindanao. Globe expects to sign the sale and leaseback agreement with this tower company within the 3rd quarter, with the first closing happening within the 4th quarter of the year.
Furthermore, these proposed sale and leaseback transactions affirm Globe's commitment to the United Nations Sustainable Development Goals, particularly UN SDG No. 9, which highlights the roles of infrastructure and innovation as crucial drivers of economic growth and development. This also supports Globe's mission to deliver a #1stWorldNetwork for Filipinos by leveraging on the strengths of the tower company partners to increase operational efficiencies.
"We have always been looking for ways to monetize our tower assets and this record-breaking initiative marks our continued commitment to optimize our capital raising efforts and further strengthen the balance sheet as we seek to capitalize on opportunities in the telecommunications sector and complementary services," said Rizza Maniego-Eala, Globe Chief Finance Officer.
"These expanded long-term partnerships with the tower companies show Globe's commitment to help improve the Philippines' internet condition, as well as our desire to have as many Filipinos enjoy the benefits of having access to reliable internet. We also believe that through these monetization efforts, Globe will be able to further improve overall operational efficiency, allowing us to serve our customers better, and supporting our goal of enabling the digital lives of Filipinos," said Ernest Cu, Globe President and Chief Executive Officer.
"We are very pleased with this landmark deal with Globe that marks a critical milestone in MIDC's strategy to enter the digital infrastructure space, which plays a vital role in driving economic growth and social well-being through digital inclusion. This also gives us the momentum to pursue more opportunities that will help us achieve our aspiration to become a trusted telco tower operator in the Philippines and eventually, a market leader in the digital infrastructure business," MIDC Chairman Atty. Ray C. Espinosa said.
Patrick Tangney, Chairman and CEO of Frontier Towers, said, "We are honored by the trust Globe has shown Frontier in forming a long-term cellular tower strategic partnership. We look forward to continued collaboration with Globe and the country's mobile network operators to advance the growth of digital infrastructure locally and to deliver stronger connectivity and sustainable, inclusive economic growth to the people of the Philippines."
Discussions on the sale and leaseback opportunities with the other tower company are still ongoing and there is no certainty that such discussions will lead to a definitive transaction. Globe will make relevant announcements in accordance with the rules of the Philippines Stock Exchange as and when appropriate.
UBS AG acted as an exclusive financial advisor to Globe on the transaction.