With continued subscriber take-up, high-speed fixed broadband operator Converge Information and Communications Technology Solutions, Inc. (Converge) revenues soared 81.5 percent to P11.781 billion while earnings more than doubled to P3.252 billion in the first half of this year versus the same period in 2020.
Overall, revenues from its residential business more than doubled to P10.212 billion, driven by an 85 percent year-on-year (YoY) growth in its subscriber base to 1,355,079 which boosted residential average monthly revenue per user (ARPU) by 7 percent.
On the other hand, enterprise revenues grew slightly by 3.8 percent YoY to P1,569 million, mostly from the growth in its small and medium enterprise (SME) customer base.
By second quarter this year, Converge captured 47 percent market share of fixed broadband net adds among the country's three largest broadband operators.
This translates to an increase in its fixed broadband market share from 21 percent in June 2020 to 29 percent in June 2021.
Reflecting the high demand for fixed broadband connectivity services in the Philippines, the company estimate that 95 percent of its new subscribers in the second quarter were first time fixed broadband users.
Converge completed the first phase of its domestic subsea cable network in the VisMin region in 2Q2020, activating an end-to-end nationwide backbone reaching from northern Luzon to Mindanao.
The company deployed a record 565,848 new fiber-to-the-home (“FTTH”) ports during the quarter, more than twice the number of FTTH ports deployed during the same quarter the previous year.
As of June 30, 2021, Converge’s nationwide network reached more than 8.3 million homes, on track to reach its target to cover approximately 55 percent of households in the Philippines by 2025.
Continued prudence in the management of direct costs, such as international bandwidth and leased line costs and increasing operating leverage enabled Converge to sustain its EBITDA growth.
Converge achieved an EBITDA of P6.494 billion in 1H2021, representing an increase of 96.0 percent from 1H2020.
As a result, Converge was able to improve its record consolidated EBITDA margin to 55.1 percent in 1H2021, higher than the 51.1 percent in the same period the year prior.
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 its other international lease agreements, resulted in a reduction of bandwidth and leased line costs from 9.8 percent of total revenues in 2Q2020 to 3.8 percent of total revenues in 2Q2021.
The cost reductions outpaced the increase of other cost items such as personnel cost, which increased from P609 to P1,008 as a result of additional headcount and employee stock ownership plan recognition.
Converge’s Return on Invested Capital (ROIC) improved to 21.6 percent in 1H2021 from 20.0 percent during FY2020.
This industry-leading performance is a result of Converge’s record net profits in 2Q2021 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 maintained its strong balance sheet and cash flows with ample liquidity and gearing comfortably within bank covenants, despite drawdowns from available facilities to finance its network expansion.
The company’s net debt position increased from P230 million as of March 31, 2021 to P6.339 billion as of June 30, 2021 as the it availed of P2.9 billion in new debt offset by repayments and amortizations amounting to P1.8 billion.
The company’s debt service coverage ratio (DSCR) was 3.0x and the net debt position as a percentage of total equity was 20 percent, well above the required financial covenants from its debt facilities.
Converge’s total undrawn debt facilities amounted to P22.5 million (~US$466 million) as of June 30, 2021.
“We’ve already hit the ground running when we had our soft launch in Cebu last November," says Converge CEO and Co-Founder Dennis Anthony Uy.
"Considering that we’ve only been operating in Mandaue and Cebu cities on a limited basis, we’ve already signed on thousands of subscribers and established partnerships with SME and Enterprise clients,” he pointed out.
Converge is also set to start the construction of a data center in Cebu as it prepares to serve the surge in the data requirements in Visayas and Mindanao.
“Developments in cloud computing, big data, virtual reality, combined with the increasing demands on remote storage and streaming technology is creating massive demand on our network and data centers," according to Uy.
"We want to respond to the high-capacity needs of our network and customers and to be able to accommodate any new-generation technologies they may have,” he concluded.