Converge eyes P17B-P19B capex spend in 2024

LISTED fiber internet service provider Converge ICT Solutions, Inc. announced on Monday a plan to allocate P17-19 billion for capital expenditure (capex) budget this year.

“Due to upcoming international subsea cable payments, the inclusion of capital outlays for data centers, and delays in supplier invoices earmarked for 2023 payment, the company now looks to spend P17 billion to P19 billion in cash capex this 2024,” Converge said in a stock exchange disclosure.

For 2024, the majority of the company’s capex budget is allocated to investments in two international subsea cable systems, namely the Bifrost Cable System and the Asia Pacific South-East Asia Hainan-Hongkong Express (SEA-H2X) Submarine Cable System, Converge Chief Executive Officer Dennis Anthony H. Uy said during a briefing.

“The Bifrost cable… our landing stations are ready. They are laying cable now from Singapore to Davao. Hopefully by the end of the year, it is up. We are preparing the payment for that. The other one is the ongoing construction from Hong Kong branching to Philippines going to Singapore. This is inter-Asia,” Mr. Uy said.

“But traditionally, we still keep some for upgrade and network resiliency. Majority is still on the two deep-sea cables,” he added.

Bifrost is a transpacific cable system connecting Singapore, Indonesia, the Philippines, Guam, and the west coast of the United States, while SEA-H2X is a submarine cable system connecting Hong Kong SAR China, Hainan China, the Philippines, Thailand, Malaysia, and Singapore.

Last year, the company’s capex stood at P9 billion, Converge Deputy Chief Finance Officer Christine Renee R. Blabagno said during a virtual briefing. Most of this budget was allocated to outside plant, inside plant, and customer premise equipment, she added.

Some P3 billion worth of capex in 2023 was also carried over to 2024 “due to late invoices received from submarine cable contractors and delays in construction for some assets.”

For 2023, Converge posted a 22.3% growth in its net income to P9.1 billion as consolidated revenues surged by 5% to P35.4 billion.

Residential revenues rose by 3% to P30.28 billion from P29.46 billion in 2022 as full-year net additional subscribers rose 35% to 250,691.

“In 2023, we have consistently upheld momentum for our newly launched products Surf2Sawa and BIDA Fiber, supported by the consistent growth in our flagship brand FiberX, especially in the fourth quarter,” Mr. Uy said.

The company’s enterprise revenues also climbed by 20% to P5.1 billion from P4.23 billion in 2022. All of its enterprise segments saw double-digit growth, led by the small and medium enterprise segment with 34.9%, wholesale segment at 14%, and enterprises and corporate at 13%.

The internet provider ended 2023 with a total of 2,128,052 subscribers. This is comprised of 2,013,216 postpaid subscribers and 114,836 prepaid subscribers

Converge President and Co-Founder Maria Grace Y. Uy said the company is anticipating a “better outlook” in 2024 as it aims to grow revenues by 7-8%.

“We are hoping to grow the revenue. Last year, we only grew by 5%... We are aiming a revenue growth of 7-8% for 2024. We expect the growth in residential businesses…,” she said.

Converge also plans to leverage omnichannel marketing and expand its sales partner coverage to enhance its residential business.

“To provide enterprise clients with a seamless customer experience, the company intends to take a more proactive account management approach and widen its product offering by exploring non-connectivity solutions,” it said.

On Monday, Converge shares rose by 3.02% or 26 centavos to P8.86 apiece.