Monday, June 1, 2009 | MANILA, PHILIPPINES
Corporate News
DIGITAL PARADISE, Inc., operator of the Netopia chain of Internet cafés, is spending P20 million for expansion and upgrades this year despite continued net losses due to tight competition and the growing number of broadband subscriptions.
George H. Tan, Digital Paradise president and CEO, told reporters losses have narrowed to between P2 million to P3 million in the first quarter, from P3 million to P4 million in the same period last year.
Netopia has to contend with the rapidly increasing number of small Internet cafés offering lower prices.
"We cannot match their prices because we are using licensed software and paying relatively high taxes," he said.
Also, wired and wireless broadband services offered by telecommunications companies such as Philippine Long Distance Telephone (PLDT) Co., Globe Telecom, Inc., Sun Cellular of Digital Telecommunications Phils., Inc., and Bayan Telecommunications, Inc. have reduced the number of Internet café users overall.
PLDT, Globe Telecom and Sun Cellular have reported double-digit growth in broadband subscribers, resulting in increased revenues.
Digital Paradise is 75% owned by ePLDT, the information and communications subsidiary of PLDT.
Given the change in consumer preferences, Netopia executives are planning to shift focus from Internet services to gaming to increase the profitability of its Internet cafés.
"We observe that computer gamers offer a promising market, but restrictions are very high especially for cafés that are near schools," Mr. Tan said.
Netopia, whose main clients include students, will spend P20 million for computer upgrades and additional cafés, as well as to buy back franchised outlets to keep them open.
"Aside from PC upgrades, we are building more cafés inside the malls and we are planning to buy franchises to save them from closing shops," Mr. Tan said.
Netopia now prefers to rent space inside malls where Internet cafés are on a level playing field in terms of rent and expenses on licensed software.
Netopia has 143 cafés, 85 of which are company-owned. Five cafés were opened this year, while two franchises were bought back.
"Hopefully, the improvements seen in the second quarter will continue up to the start of school year this June so that we can have a turnaround with our losses," Mr. Tan concluded. — Jeremiah F. de Guzman
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