Converge gets $250M from US-based investment fund

Fiber internet company Converge ICT Solutions on Monday formally welcomed the entry of its first outside investor, United States-based Warburg Pincus, one of the world’s biggest private equity firms.

Converge ICT founder and president Dennis Anthony H. Uy told the Inquirer the company raised $250 million, or P12.8 billion, in what was Warburg Pincus’ first investment in the Philippines. The transaction involves a “sizable” minority stake in Converge, he said.

Uy said the fresh funds would help Converge roll out infrastructure as it aims to capture 30 percent of the country’s broadband market in the coming years.

“The public is hungry for broadband,” Uy said during the ceremonial signing event on Monday. The Inquirer first reported the deal last July.

The two parties came together after more than a year since a selection process was launched with Converge ICT’s financial adviser, UBS.

Uy said Warburg Pincus was selected among several investors due to its deep understanding of the business and expertise. “It’s not just about the money,” Uy said.

“This partnership marks our first significant investment in the Philippines,” said Saurabh Agarwal, Warburg Pincus managing director.

Agarwal said Warburg Pincus has $20 billion invested in Asia and about $65 billion in assets under management.

“We’ve been investing in the broadband and the telecom space for a long time. We know it well,” he told the Inquirer.

The funds from Warburg Pincus will help finance Converge ICT’s plan to build a $1.8-billion nationwide internet backbone. For future funding, Uy said he has commitments from local banks to raise another $800 million.

The current rollout includes a $70-million domestic submarine cable with 20 landing stations across the Philippines, Uy said. The Luzon backbone will be substantially complete by the first quarter of 2020.

Uy noted that Converge ICT hopes to capture a third of the country’s 22 million households.

Right now, the company has half a million customers and the target is to double this figure by 2020. Uy said Converge ICT has also been expanding the existing market, given that 70 percent of its customers have never had a fixed broadband service.

Converge ICT is building infrastructure along with partners KT Corp. of South Korea and LSI-Fibernet Konstruk Corp., a Filipino-Korean venture.

Fiber cables are costly and time consuming to roll out. Converge ICT, through its subsidiary MetroWorks ICT Construction Inc., lays down fiber using microtrenching, which it claims is less disruptive than the traditional “open trench” approach.