To build or not to build: Dito weighs entry into data centers

MANILA, Philippines — It is becoming more and more tempting for Dennis Uy’s Dito Telecommunity Corp. to hop on the data center bandwagon, but it will likely do so only when it turns profitable.

Dito chief revenue officer Adel Tamano told The STAR that the telco has started looking at the business case of building data centers for enterprise and government clients.

Tamano said the issuance of Executive Order (EO) 119 has changed the game for the data center industry in the Philippines, as it guarantees an automatic demand for operators.

EO 119, issued in July, mandates government agencies to store top-secret and secret information locally. Data center players such as VITRO Inc. and ST Telemedia Global Data Centers (STT GDC) Philippines are expected to cash in from this because of their infrastructure advantage.

Dito may have data centers in its portfolio right now, but they function for its own requirements. Nonetheless, Tamano said these facilities can be scaled up in the future to serve external clients.

“We have the capacity to expand these data centers if we want to, but we need a strong business case. Yes, we are open to it. Right now, we just don’t have a decision yet,” Tamano said.

Largely to blame for Dito’s hesitation to build data centers is its struggle to become profitable, as capital and income losses are only worsening yearly.

As of June, Dito’s parent Dito CME Holdings Inc. has tripled its net loss to P11.29 billion, from P3.36 billion a year ago.

Dito grew its revenue by 21 percent to P11.67 billion, and kept expenditure hike to six percent to P17.41 billion. However, the telco was struck by higher interest payments of P10.04 billion and foreign exchange losses of P13.88 billion.

China Bank Capital Corp. managing director Juan Paolo Colet said it would be better for Dito to attain its financial targets first, such as booking a profit by 2028. He warned against entering the data center business in Dito’s bleeding condition.

Based on estimates from property analyst Cushman & Wakefield, a data center in the Philippines costs a minimum of $6.6 million, or over P405 million, per megawatt of capacity.

“Rolling out a competitive data center business is capital intensive, and would entail a significant upfront investment,” Colet told The STAR.

Tamano agreed, adding that some data centers may even cost more to build, especially if they are designed to store high-computing requirements, such as artificial intelligence (AI).

Still, Dito is keeping its doors open to the opportunities of operating data centers. VITRO, a unit of PLDT, is turning into a growth driver for the telco, averaging a revenue increase of 13 percent to date.

As the country’s largest data center operator, VITRO is scaling up its operational capacity to 44 megawatts this year and to 62.4 MW by 2027. It is also listing as a real estate investment trust at the Philippine Stock Exchange, eyeing to raise P24.2 billion.

The Ayala Group’s data center arm STT GDC Philippines is also raising its own capacity to 30 MW this year, encouraged by the government’s decision to mandate data residency.

Tech mammoths like Amazon, Google and Meta store their applications and information in data centers, making these facilities crucial and profitable to have in the digital era.

However, concerns are also growing over the environmental impact of data centers, especially as the largest of them consume up to five million liters of water per day for cooling.