Is the mobile sector their next target?
The Uys have long maintained that Converge (CNVRG) will focus on the fixed-line space, where a vast majority of Filipinos remain unconnected due to geographic or economic constraints.
But with the new Konektadong Pinoy Act (KPA) lapsing into law, stock brokerage house First Metro Securities (FMS) sees a compelling case for the Uys to enter the massive but mature mobile industry in the future.
This opens a path into a segment long dominated by the Ayala Group’s Globe Telecom and PLDT’s Smart Communications, where DITO Telecommunity has been slowly expanding its presence.
What FMS said?
In a recent report on the impact of the Konektadong Pinoy Act, FMS said Converge stands out as a clear winner, with the law allowing the firm to turn its current infrastructure underutilization into an advantage by leasing excess capacity to new players.
“In the long term, the KPA could facilitate CNVRG’s entry into mobile, completing its telco suite,” the stock brokerage house said.
Converge already holds a key advantage with its extensive fiber infrastructure.
These underground cable systems are critical for linking cell towers and supporting 5G and future mobile technologies. In other words, it gives the Uys a strong foundation if it moves into mobile.
We see a few scenarios
For now, the Uys lack access to cell sites, but the features of the Konektadong Pinoy Act and independent tower companies help bridge this gap.
The law, whose implementing rules are still being finalized, will also provide a spectrum management framework that allows the review and reallocation of frequencies.
The bulk of radio frequencies—essential to providing mobile services—are held and used by Globe, Smart, and DITO Telecommunity.
For now, reallocating these frequencies is unlikely as they are used by millions of Filipino customers, but shifting business conditions could change that over time.
How about MVNOs?
An even less risky and more cost-efficient strategy is rolling out as a Mobile Virtual Network Operator (MVNO).
This allows a fixed-line operator to offer mobile services by leasing network capacity from established carriers instead of building its own towers and infrastructure.
A recent example of an MVNO was ABS-CBN Corp.’s ABS-CBNmobile, which used the network infrastructure of Globe Telecom.
The business was closed down in 2018 after management determined it was financially unviable, proving that success is far from guaranteed even with a strong brand.
The Uys previously eyed telco services
Before the KPA, the biggest shake-up facing the telco sector was the selection of the so-called third major player during the Duterte administration in 2018.
This exercise gave birth to DITO Telecommunity, the telco launched by Davao-based businessman Dennis A. Uy in partnership with China Telecom.
Converge, with South Korea’s No. 1 telco KT, was among those keen on joining the exercise before backing out due to issues on viability.
“The team concluded that while the market and industry outlook was financially viable, the conditions imposed for participation render the venture commercially unviable,” the Converge-KT consortium said in a statement before the bids were opened on Nov. 7, 2018.
The group also holds a mobile franchise
The Converge-KT consortium mentions a third partner, which was TelTech.
This refers to the Uy-controlled Telecommunications Technology Solutions Unlimited Inc., which holds a congressional franchise to offer mobile services.
This shows that even years ago, the Uys had positioned for a possible entry into the segment.
They don’t need the franchise-free features of the KPA, but other provisions, including spectrum reallocation, might one day prove beneficial.
The bottom line?
The Uys are clearly focused on maintaining Converge’s profitability.
This is evident in their deliberate approach to strategic partnerships instead of outright acquisitions, as seen in their asset-sharing deals with DITO and even ABS-CBN’s SkyCable.
This is also why FMS framed mobile as something for Converge, or another Uy-controlled entity, to consider in the future, as it anticipates near-term disruption in mobile thanks to the KPA.
For now, it appears there’s no rush for the Uys to jump into mobile.
But as they said in their 2018 bidding statement, the door isn’t closed and they may again do so “if another opportunity arises.”
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
