Converge Cuts 2023 Capital Budget

After preloading most of the capital expenditure (CAPEX) needed to expand its network over the past three years, Converge ICT Solutions Inc. said he had decided to cut his spending by as much as 45 percent.

Converge said the lower capital expenditure for 2023 is due to the company’s accelerated investment in its backbone and access segments during the pandemic.

These accelerated spending enabled the company to meet its 2023 goal of reaching 55 percent of Filipino households with fiber in 2022.

“We built our infrastructure so quickly. This country does not have an operator producing two million ports a year. We were able to build early and mitigate the impact of inflation and exchange rate differentials,” said Dennis Anthony Yu, CEO of Converge.

Grace Ui, president of Converge, says Converge will slow down its massive capital investment this year. “We need to slow down a bit and focus on those that have been deployed to improve the use of these ports,” she said.

Converge currently has 7.9 million ports in the country through which 14.9 million homes pass, or 56.2% of household coverage across the country.

Thus, Converge will spend 30-45% less than the actual capital expenditure in 2022 of 21.9 billion pesos.

Most of this year’s capital expenditure will be used to deploy additional ports and routers for subscribers, with a quarter of that to support business growth in the Visayas and Mindanao. The remainder will be used for investment in other submarine cable networks and digitization efforts.

This year, Converge plans to expand to new cities in Bohol, Zamboang, Palawan and Aklan, among other areas this year. In addition to the residential business, the company plans to expand its corporate segment and complement it with a data center business.

During the same press briefing, Converge unveiled its latest service offering called Surf2Sawa, a prepaid service targeted primarily at markets C, D and E.

The prepaid service requires an upfront payment to install a modem, while the prepaid segments range from 50 pesos for a day of unlimited fiber internet to 700 pesos for 30 days of unlimited fiber internet.

Converge ended 2022 with a 4% increase in profit to 7.43 billion pesos from 7.16 billion pesos on the back of a jump in revenue of 27.3% to 33.7 billion pesos from 26.48 billion pesos.

The company aims to increase its revenue by “10-15%”, which is a slower pace compared to last year.

Converge COO Jesús Romero said the company now has a larger revenue base compared to 2022, hence the slower growth but still a higher absolute figure.

“Once you get big, the percentage growth rate will be lower. The focus is on absolute numbers,” he said.