September 6, 2021 | 8:29am
The country’s fastest-growing broadband provider, Converge [CNVRG 31.90 0.31%] G, said in a press release that it had signed a P3 billion term loan for the network expansion, with an additional P2 billion in short-term credit available to fund “trade transactions”. As of June, CNVRG’s network had reached 33% of PH households, with a target to reach 55% of households by the end of 2024. CNVRG refers to this as its “Go Deep” strategy.
CNVRG’s CEO, Dennis “Pampanga Dennis” Uy, said that there is still “huge pent-up demand for high-speed broadband connectivity”, and that the Landbank loan package would help CNVRG connect “untapped” markets and to “go deep into existing ones”.
Provided the rate is low and the loan is used judiciously, a good loan can be a huge asset to a company like CNVRG that is expanding very quickly. I think there are some who look at any form of debt in a negative light, but in my view, a loan is just a rental agreement for money that can really amplify a company’s advantage. It’s hard to argue with CNVRG’s exploding subscriber counts, and investors are probably happy to take on some debt to watch CNVRG run up the score in that respect by using this loan to hit new markets and saturate existing ones more quickly.
From a business perspective, the sooner that CNVRG connects a house, the more long-term profit the company can pull out of each connected user. To me, speeding up the process of connecting these customers is a great reason to tap a loan like this, and beats waiting for the company to organically fund the expansion using internally-generated funds.
Merkado Barkada’s opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.