Broadband tycoon Dennis Anthony Uy is open to expanding Converge ICT Solutions beyond fiber services, hinting at larger growth ambitions for the company, including potential acquisitions.
“We are always on the lookout for profitable business opportunities, whether from investing in another company or improving our current products,” Uy, the co-founder of the country’s largest pure fiber company, said during their stockholders’ meeting on Friday.
He went further, stating the company has established a “dedicated budget” this year for research and development activities, which could pave the way for diversification to adjacent investments.
“The budget will allow us to look for ways where we can improve existing products, create innovative new ones, and look for value-added services beyond connectivity that are beyond our core business so that we can provide our subscribers with world-class connectivity,” Uy said.
Big picture
Uy’s statements highlight the company’s evolving strategy and its shift from solely growing its fiber network.
Converge has achieved significant market share and met nationwide network milestones ahead of schedule.
Despite its growth, it faces competitive pressure from integrated internet rivals such as Globe and PLDT.
Converge’s potential move beyond fiber also aligns with the ongoing diversification strategy being pursued by other players within the industry.
For example, Globe has successfully grown its e-wallet business GCash into the country’s first unicorn, with a valuation estimated at several billion US dollars.
Partnerships
Converge has not yet announced acquisitions since going public in 2020 but the group has sealed multiple strategic partnerships.
Earlier this year, it formed an alliance with telco challenger DITO Telecommunity to share select land-based and undersea fiber optic cable assets.
Fiber still growing
Maria Grace Y. Uy, Converge co-founder and president, said during the meeting they are still tracking growth in the core businesses.
Total revenues, which hit P35.4 billion in 2023, will grow 7-8 percent in 2024. The split was 6 percent growth for residential and 12 percent growth for business customers.
Earnings before interest, taxes, depreciation, and amortization margin is projected at 58-59 percent while their closely-followed return on invested capital is forecast at 15-16 percent this year.
Dividends?
She said deeper penetration this year will add 450,000 subscribers to end with almost 2.6 million users. By 2027, that figure should reach 4 million subscribers—over half of which will be users of Converge’s more affordable broadband services.
While Converge’s first-ever dividend payout is eagerly anticipated, Grace Uy said they will issue dividends in 2025, as promised during their initial public offering.
Analyst View
Stockbrokerage house AP Securities Inc. senior research analyst Ferdinand Subido said prepaid fiber presents a significant opportunity for the industry.
He gives the long-term edge to Converge, which has the potential to grow its subscriber base due to more attractive pricing and the widespread availability of its internet ports.
Buy Ratings
At the same time, Subido noted that PLDT Inc.’s extensive network infrastructure enables it to rapidly capture market share.
Buy ratings were assigned to PLDT with a target price of P1,677 per share and Converge, which has a target price of P14.39 per share.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
