Can Converge ICT Break PLDT and Globe’s Duopoly in the Philippines?

A. Amir

Summary Bullets:

• Converge ICT is rapidly expanding its business and upgrading its infrastructure.

• While it is breaking PLDT and Globe’s dominance in the mass market, Converge ICT is still several steps behind in the enterprise segment.

The Philippines Managed Services Market
Like other emerging ASEAN countries, the Philippines managed ICT service market has been growing rapidly in the last few years driven by digital transformation initiatives by enterprises across different industries. The adoption of newer technologies such as cloud and SDN/NFV is increasing and has recently been accelerated by new demands such as remote working during the COVID-19 crisis. While the market is largely dominated by the two big carriers: PLDT and Globe; there are several other players such as Converge ICT, Radius Telecoms, Eastern Communications, and NOW Corporation with a small piece of the market share pie respectively.

Converge ICT
One that stands out against the other smaller players this year is Converge ICT. Recognized as the Philippines fastest-growing fiber Internet provider by an independent firm, it has expanded its subscriber base from the 200,000 in late 2018 to 750,000 this July, with an additional 50,000 and 60,000 new customers in May and June respectively, despite the challenges of the COVID-19 crisis. In the last 12 months, Converge ICT has also rapidly upgraded its access infrastructure from DOCSIS to fiber and increased its transport network capacity with additional capacity to Internet exchange (PHOpenIX), 400G metro backbone, and new submarine cables across the Philippines. The provider plans to go for an IPO later this year to raise additional funds to further grow the business. It also announced its plan to establish a smart city inside the Subic Bay Freeport.

Threat to Incumbents?
In the mass market segment (consumer and SMB), Converge ICT has successfully broken the duopoly by outpacing their fixed broadband subscriber growth in H1 2020. With 750,000 subscribers, Converge ICT has surpassed Globe (677,903) and is closing the gap with the market leader, PLDT (2.1 million). However, it is still several steps behind both competitors in the enterprise segment. The provider plays mainly in the connectivity layer, offering bandwidth and technologies (e.g., Ethernet, MPLS) while others have gone beyond the stack leveraging the latest technologies such as SDN/NFV and analytics to provide outcome-based network solutions. Converge ICT’s strategy may change after the IPO, but it will take several years for the providers to build the capabilities in enterprise ICT and close the gap with PLDT and Globe.

What’s Next for the Providers
For PLDT and Globe, the threat from Converge ICT could persist in the next few years if the latter expands its enterprise ICT portfolio beyond the connectivity stack. In the meantime, PLDT and Globe should continue to strengthen its brand in the segment and enhance its solution capabilities to retain their market advantage. PLDT and Globe could also highlight their wide ICT capabilities beyond connectivity stack (e.g., cloud, UC, security), mobility advantage, professional services, and partner ecosystem, when competing against Converge ICT.

For Converge ICT, the provider should start building out capabilities beyond the network layer. For example, SDN/NFV, cloud interconnects, multi-cloud solutions, and security services. This is important not only to catch up with PLDT and Globe, but also to address the changing market demand in the country. ICT purchasing is moving from technology to business outcomes. Bandwidth and connectivity are becoming commodities while value-added services are crucial for providers to address customers’ business challenges and differentiate in the market.

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