Data center dilemma

With the advent of artificial intelligence (AI), most bets in the market are on investments to build data centers but telcos seem not to be pouring capital into this new field.

PLDT is even selling a minority stake in its data center venture. While data centers can deliver huge profits, they are operationally heavy and too different from the core business of PLDT, and would require additional manpower and resources to maintain.

As such, AP Securities said PLDT’s sale of a minority stake in its data center business can help lower the capital requirements and allow its strategic partner to manage its data centers. This would also help take the company one step closer to its goal of being free cash flow positive by 2025.

In the case of Globe Telecom, it is tapping someone else to manage its data center business through a partnership with ST Telemedia Global Data Centers (STT GDC).

STT GDC Philippines is a joint venture among Globe, Ayala Corp. and Singaporean data center operator ST Telemedia Global Data Centers. GLO is still the majority stakeholder, with STT GDC managing the operations of its data centers.

Globe’s VP for enterprise data and strategic services, Jennifer Echevarria, said the company is looking at possible AI investments to increase operational efficiency in customer engagement and day-to-day operations.

A precursor for Globe’s future adoption of AI is its early investments in data centers, as these are necessary to provide the computing power, storage and memory demands of the resource-hungry AI.

According to a McKinsey & Company study, AI is a key driver of growth in data center demand with AI’s contribution to total capacity growing by 33 percent annually.

Boom over?

Property developers are worried about signs of the property bubble bursting after a report by Colliers Philippines showed an inventory of 75,300 pre-selling and ready-for-occupancy condo units worth P154.4 billion.

Among the factors for the slowdown in the property sector were the aggressive rate hikes from the Bangko Sentral ng Pilipinas which dampened demand for property and the eviction of the Philippine Offshore Gaming Operators (POGO) from the country.

The estimate is that it may take developers 5.8 years to clear their inventory, five times longer than it used to take before the pandemic.

Developers have responded by offering discounts of up to 25 percent for cash buyers, extended and discounted downpayment terms, and easier installment schemes.

Rising panic over the condo glut, along with the prospect of slower easing, has weighed heavily on listed property companies. This is further exacerbated by the POGO ban and the resulting jump in office vacancies.

Among the exceptions to the sector’s downslide is SM Property Holdings (SMPH) which has for its core business the operation of malls and not the sale of condo units or lease of office space.

Excluding the pandemic era, mall revenues typically account for around 53 percent of SMPH’s revenues while property development accounts for around 37 percent.

Further, SMPH’s position as the top mall operator in the country ensures that the occupancy rate of its malls always remains high, with the current occupancy back to the pre-pandemic level of 95 percent.

SMPH, thus, is shifting its focus from building more residential units to boosting its mall portfolio to 100 by the end of 2027.