With its residential business driving growth and subscriber take-up going strong in the pandemic, pure-play high-speed fixed broadband operator Converge Information and Communications Technology Solutions, Inc. (Converge) netted P5.2 billion earnings, up 27.6, on P18.831 billion revenues, up 76.4%, in the first nine months of 2021 versus the same period last year.
Revenues from the company’s residential business grew 94.6%, almost doubling from P8.413 billion to P16.374 billion in the comparative period.
Subscriber base rose 75% year-on-year (YoY) while Converge maintained a steady residential average monthly revenue per user (ARPU) of P1,346.
On the other hand, enterprise revenues grew 8.5% YoY, from P2,264 million to P2,457 million, mostly from the strong growth in the small and medium enterprise (SME) business, continuing the reversal trend seen in 2Q2021.
Over the last three months, Converge added a record number of 279,895 quarterly gross adds and 221,680 quarterly net adds.
For August alone, the company added more than 100,000 new subscribers.
As Converge expanded to new service areas and augmented its sales force, its residential subscriber base grew from 900,531 to 1,576,759.
Significantly, this also showed the high unserved demand for fixed broadband connectivity services in the Philippines.
First time fixed broadband users accounted for 94% of Converge’s new subscribers nationwide in the third quarter of this year.
Revenues from the company’s enterprise business grew 8.5% YoY, and by 8.3% quarter-on-quarter (QoQ), representing a continuous upward trend from the pandemic related slowdown recorded in the first quarter of 2021.
Its SME business continued to boost its customer base to more than 17,785 with the strong take-up of its flexiBiz product.
Revenues from large enterprise customers likewise contributed to enterprise business growth in 3Q2021, notably with large contract wins in its international wholesale business during the last quarter.
Converge deployed 654,188 new fiber-to-the-home (FTTH) ports during the third quarter and as of end September, its nationwide network reached more than 9.6 million homes.
As a result, the company is on track to reach its accelerated target of covering 55% of households in the Philippines by 2023, 24 months earlier than projected during its Initial Public Offering last year.
Furthermore, Converge achieved a record EBITDA of P10.371 billion up 86.0% in the comparative period.
Hence, it improved its consolidated EBITDA margin to 55.1% versus 52.2% in the same period last year.
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, reduced bandwidth and leased line costs from 8.5% of total revenues in 3Q2020 to 3.5% of total revenues in 3Q2021.
The cost reduction offset the increase of other cost items, such as network materials and supplies used, which grew by 75.5% from 3Q2020 to 3Q2021 due to the ongoing subscriber acquisitions.
Converge maintained its first half 2021 Return on Invested Capital (ROIC) of 21.7% to the first nine months, from 20.0% during FY2020.
This was due to Converge’s record net profits in the first nine months and its disciplined approach in deploying capital to expand its fiber network and tracking key capital efficiency indicators, such as port utilization ratios.
Converge maintained its blended port utilization ratio of 30%, despite deploying another record number of FTTH ports during the last quarter.
Out of the third quarter 2021 FTTH ports deployed, around 20% were rolled out in Visayas and Mindanao as Converge expanded into new markets.
Overall, Converge maintained a strong balance sheet and cash flows with ample liquidity, gearing comfortably within bank covenants despite drawdowns to finance its network expansion.
The company’s net debt position (as measured by total financial debt less cash and cash equivalents) increased from P6.339 billion as of June 30, 2021 to P8.451 billion as of September 30, 2021.
Beyond expanding its network nationwide, Converge likewise invests in network equipment upgrades and backbone network redundancies to ensure reliable services to customers.
During the third quarter, the company completed its North Luzon fiber optic loop, making its network completely redundant in the region and ensuring continued service.
“This means if there’s a fiber break in the area, services will continue,” assured Converge CEO Dennis Anthony Uy.
“Amid the continued community quarantine restrictions and lockdowns, Filipinos consume more and more bandwidth at home for work, school, and entertainment,” he explained.
“Thus, we aim to cater to the growing demand across the country, including North Luzon.”
As part of strengthening its foothold in North Luzon, Converge said it is set to finish the total fiberization of Pangasinan and La Union this month.
Converge also secured multiple enterprise business contracts during the last three months resulting in a 8.5% YoY revenue growth of the Enterprise Business.
One key growth driver came from its Enterprise Wholesale business, where Converge is re-selling bandwidth capacity on its local and international fiber cables to enterprise and telecom clients on a wholesale basis.
One of the biggest cable TV and broadband service providers in VisMin contracted Converge to provide them with 10Gbps of bandwidth capacity.
In addition, Converge won a bid to provide 20Gbps international connectivity for a local government institute’s research arm to access contents from the United States.
This one-year contract will help boost enterprise revenues by more than P50 million. Lastly, Converge won its largest bandwidth wholesale contract to connect 100Gbps of capacity between Singapore and the Philippines for two years.
The contract will support the growth of the company’s wholesale business as it regionalizes its presence and strategies.