Converge allots P28B this year to grow network capacity

After doubling its net income last year, Converge Information and Communications Technology Solutions Inc. is ramping up investments in capacity this year to keep the momentum as it anticipates heightened demand from the residential segment and small and medium enterprises (SMEs).

Converge president and co-founder Grace Uy said in a briefing on Thursday that the internet service provider has earmarked P26 billion to P28 billion in capital expenditures this year to expand its network and deploy additional fiber ports. This is higher compared to P25.2 billion spent last year.

She said the allotted spending can lead to 50-percent revenue growth, 55-percent earnings before interest, tax, depreciation and amortization margin and 20-percent return on invested capital for the company.

Broken down, Converge chief financial office adviser Matthias Vukovich said 62 percent of the capital expenditures (capex) are for boosting access to consumers; 25 percent is for backbone expansion; and the balance is for other spending, including digitization efforts.

Vukovich noted that the capex is already “fully funded” and a portion of this will be coming from its long term peso-denominated bonds offering. It is set to issue the debt securities, amounting to as much as P10 billion, this month.

Other sources of funding for the capex are the company’s long-term debt facilities with eight commercial banks, cash at hand and improving operating cash flows.

This year, Converge sees its residential subscribers reaching 2.4 million due to robust demand for high speed broadband. This segment grew by 63 percent to 1.69 million subscribers in 2021.

Internet subscriptions from the residential segment contributed the bulk of the consolidated revenues last year, which rose by 69.2 percent to P26.48 billion from P15.65 billion in 2020.

Revenues from residential business increased by 83.2 percent to P23.13 billion year-on-year on the back of 63-percent subscriber base growth, along with better average monthly revenue per user as more customers subscribed to fiber plans.

Meanwhile, Converge chief operations officer Jesus Romero said that SMEs are deemed as one of the firm’s “growing pillars.”

“The pandemic forced a lot of these smaller companies to close. However, this year, we are seeing them starting to come back and there’s a lot more demand,” he said.