By Ashley Erika O. Jose, Reporter
CONVERGE ICT Solutions, Inc. is considering expanding its partnership with Lopez-led Sky Cable Corp., but has no plans to acquire the company at this time, its chief operations officer (COO) said.
“Probably not at this time, as the financials are quite challenging,” Converge COO Jesus C. Romero told reporters on the sidelines of a forum last week, referring to Sky Cable.
“What we are doing with the network sharing agreement is helping them dramatically reduce their cost then of course improve the product,” he added.
In July, Converge and Sky Cable announced a commercial agreement to upgrade Sky Cable’s network and services. Under this partnership, Sky Cable will use Converge’s network to enhance its offerings.
Mr. Romero noted that acquiring a company involves the challenge of assuming all its liabilities and debt components.
“We have a good balance sheet; it would be a heavy burden,” he said.
“So, instead [of an acquisition] we can just further cooperate,” he added.
Following the denial of its parent company ABS-CBN Corp.’s franchise renewal in 2020, Sky Cable could no longer provide direct-to-home service, forcing it to focus on its broadband subscriber base.
According to its financial report, Sky Cable’s debt stood at P4.5 billion to date.
“The reluctance to pursue an outright acquisition in the near term probably stems from Sky’s debt burden,” Chinabank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.
Pursuing an acquisition would not make sense for Converge considering the risks, especially since their partnership with Sky Cable is at an early stage, he said.
Earlier this year, Converge expressed interest in acquiring Sky Cable after Pangilinan-led PLDT Inc. withdrew its plan to acquire the unit of ABS-CBN.
“The parties are more focused on exploring ways to expand their collaboration so that Sky has a viable opportunity to grow its business, pay down debt, and return to profitability,” Mr. Colet said.
For Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce, Sky Cable is anticipated to expand its reach without incurring significant capital expenditure under its current partnership with Converge.
“This is especially important for a company like Sky, which might lack the financial strength to undertake such an expansion on its own,” Mr. Arce said in a Viber message.
“Converge’s decision to explore further partnerships with Sky while ruling out an acquisition suggests caution on their part. Acquiring Sky, which is burdened with debt, could introduce financial risks to Converge,” he added.
In August, Converge revised its revenue growth forecast for 2024 to between 12% and 14%, up from the earlier estimate of 7-8%, driven by market optimism after stronger second-quarter earnings.
For the second quarter, Converge registered an attributable net income of P2.74 billion, up 29.8% from the P2.11 billion in the same period last year.
Despite posting increased gross expenses for the April-to-June period at P6.18 billion, 15.1% higher than the P5.37 billion previously, the company managed to register higher earnings on elevated revenues.
CONVERGE’S DATA CENTERSTo capitalize on the growing interest in digitalization, Converge is considering establishing additional data centers in the country, following the planned operation of two data centers in 2025.
Last week, the company said it would open two data centers with a combined capacity of approximately 13 megawatts (MW) next year.
“I think we will open it by the middle of next year,” Mr. Romero said. “The construction is still ongoing.”
The company said its immediate plan is to complete the construction of its two data centers, with additional data center expansions being considered.
“Data center supply is growing. For us, because we only have two and both are full, we need to expand,” he said.
The planned expansion, once realized, would be in a different area, he said, adding that the company has already identified sites for the project.
“We already have identified certain sites but we need to finish these two first. We can go with the third, fourth or even fifth data center but we have not pulled the trigger yet,” he said.
For now, Mr. Romero said the company is considering establishing its data centers in the Visayas or Mindanao.
“Our usual suspects, because our two data centers are in [Luzon] — maybe Cebu or Davao and by the way our submarine cable will land in Davao. Most likely there, or South Luzon,” he said.
Converge’s Pampanga data center has a capacity of 10 MW and offers up to 1,200 racks, while its Caloocan data center has a capacity of three MW and provides up to 290 racks.