Driven by the continued growth in its subscriber base, sustained recovery of its business segment, and expansions in its operations to fully serve its customers, fiber broadband provider Converge ICT Solutions, Inc. (Converge) ended the first nine months of the year in the black, posting a net income after tax of PhP5.2-billion. This represented a robust improvement of 136% compared with the PhP2.2-billion earned for the same period last year.
The growth in net profit marked an increase of 27.6% in net income margins, from 20.5% last year. The company’s statutory corporate income tax rate, on the other hand, was reduced from 30% to 25% as a result of the signing into law of the Corporate Recovery an Tax Incentives for Enterprises (CREATE) that took effect starting July 2020.
Attributed to increased scale and cost management initiatives, Converge once again achieved a record EBITDA (earnings before interest, taxes, depreciation, and amortization) of PhP10.37-billion during the first nine months of 2021, representing an improvement of 86% over the same period the previous year. The company was able to improve its record consolidated EBITDA margin to 55.1% during the nine-month period, higher than the 52.2% a year ago.
Boosted by the strong and continued subscriber take-up, the company reported a 76.4% growth in consolidated revenues when it generated PhP18.8-billion in the first nine months of 2021, from PhP10.7-billion for the same period last year. Revenues from residential business segment increased by 94.6% to reach PhP16.4-billion from January to September 2021. Residential average monthly revenue per user or ARPU remained steady at PhP1,346. On the other hand, an upward trend was registered in Converge business revenues that came mostly from small and medium enterprises (SMEs) segment when it rose 8.5% to PhP2.5-billion, continuing its reversal trend registered in the second quarter of 2021.
The SME business continued to grow its customer base to more than 17,000 with the strong take-up in its flexiBiz products in the third quater. As part of its efforts to educate SME clients to leverage high-speed internet connectivity for business transformation, Converge continued its knowledge sharing with SMEs through numerous forums and webinars. Revenue from large enterprise customers also contributed to the enterprise business growth in the third quarter of 2021, notably with large contract wins in its international wholesale business.
Another proof of Converge’s favorable performance was the record additions of almost 280,000 in its subscription base as of third quarter 2021, bringing its total residential subscriber count to 1.6-million, 75% higher compared with the same period last year. This was attributed to the company’s goal of reaching peak levels in its port deployment at over 650,000 ports in the third quarter. Apart from this, the company’s nationwide network reached more than 9.6-million homes, allowing it to accelerate its target to cover approximately 55% of Filipino households to 2023, two years ahead of the original 2025 schedule announced during the Initial Public Offerings (IPOs) last year.
“We have completed our nationwide backbone, allowing us to expand into new areas in the Visayas and Mindanao, while continuing to go deep into underserved areas in Luzon. We have also augmented our sales force so that we can serve a broader number of our people with world-class fiber broadband connectivity,” said Converge CEO Dennis Anthony Uy.
In September 2020, Converge started to draw down on its international capacity from the Telstra Indefeasible Right of Use (“IRU”) contract, reducing the need to lease additional international bandwidth capacity. This, together with prudent management of our other international lease agreements, resulted in a reduction of bandwidth and leased line costs from 8.5% of total revenues in the third quarter of 2020 to 3.5% of total revenues in the same quarter in 2021. This cost reduction offset the increase of other cost items such as network materials and supplies used, which grew by 75.5% from the third quarter of 2020 to the same quarter in 2021 due to the ongoing subscriber acquisitions.
Converge also continued to lead the industry in the efficient use of its resources for investments with its Return on Invested Capital (“ROIC”) further improving to 21.7% at the end of September 2021. This best-in-class performance was the result of Converge’s record net profits during the period and its consistently disciplined approach in deploying capital to expand its fiber network and tracking key capital efficiency indicators such as port utilization ratios.
Converge also completed its P6 billion, 1,800-kilometer subsea cable project with its final landing in Coron, Palawan, connecting the country’s major islands to its domestic fiber backbone.
As of September 2021, Converge’s domestic fiber backbone is at 90,000 kilometers, passing through some 440 cities and municipalities nationwide and introducing its broadband service to new markets including Iloilo, Cagayan, and Cagayan de Oro.
