Fixed broadband operator Converge ICT Solutions, Inc. (Converge) registered significant improvements in its operations last year. Converge has generated consolidated revenues amounting to PhP26.479 billion in 2021, reflecting an increase of 69.2% as compared with the PhP15.652-billion reported in 2020. Revenues from its residential business grew tremendously by 83.2% to PhP23.129 billion, representing 87.3% share in the company’s revenue pie. On the other hand, the share of the enterprise segment, which reported revenues of PhP3.350-billion, comprised 12.7%.
On the enterprise business category, the SME business continued to register growth in customer base to reach 22,130 by end-December 2021, almost tripling the number of SME customers in 2020. Apart from this, revenues from large enterprise customers likewise contributed to the growth of the enterprise business in the last three months of 2021, growing 8.0% year-on-year as this segment is gradually recovering from a slowdown during the pandemic.
Considering the high unserved demand for fixed broadband connectivity services in the Philippines, the company estimated that 95% of its new subscribers nationwide in 2021 were first time fixed broadband users.
The company’s net income after tax more than doubled, from PhP3.388-billion in 2020 to a high PhP7.158-billion in 2021, which resulted to a 27.0% increase in net income margins in 2021, from 21.6% the previous year. With the signing of the bill on Corporate Recovery and Tax Incentives for Enterprises (CREATE) effective starting July 2020, Converge’s statutory corporate income tax rate was reduced from 30.0% to 25.0%. As a result, Converge’s effective tax rate dropped from 30.6% in 2020 to 25.1% in 2021.
With a growth in profitability that resulted from increased scale and management initiatives, Converge once again achieved a record annual EBITDA (earnings before interest, taxes, depreciation, and amortization) of PhP14,803-billion in 2021, representing an increase of 80.1% from the previous year. As a result, the company was able to improve its consolidated EBITDA margin to a record 55.9% in 2021, higher than the 52.5% in the previous year.
The company’s growth in revenues and net income was attributed to the continued uptick in subscription base and the improvement in the average monthly revenue per user (ARPU). Residential subscribers reached over 1.69-million in 2021 or a hike of 63% from December 2020, reaching the high-end of its subscription goal of 1.6 to 1.7 million. ARPU likewise rose from PhP1,298 in 2020 to PhP1,353 in 2021 due to the higher proportion of customers subscribed to fiber plans over HFC plans. In addition, the growth in small and medium enterprises (SMEs) and large enterprise segments propelled the rise in the enterprise segment’s operations.
Another factor that helped Converge achieve improvement in operations was the deployment of approximately 647,000 new fiber-to-the-home (FTTH) ports during the last quarter of 2021, resulting to 2.4-million newly deployed FTTH ports during the year 2021. Of the total FTTH ports deployed in the last quarter of 2021, around 16.5% were rolled out in the Visayas and Mindanao as the company is actively expanding into these new markets, while continuously deepening its presence in Luzon. As of end-December 2021, the nationwide network of Converge reached more than 10.9-million homes, representing 42.7% of household coverage, on track to reach the firm’s accelerated target to cover approximately 55% of households in the Philippines by 2023.
Despite accelerated capital expenditures of PhP25.2-billion in 2021, return on invested capital (ROIC) continued to expand as net income grew higher than invested capital. Converge registered a 20.9% ROIC in 2021 from 20.0% in 2020. The growth was the result of Converge’s record annual net profits in 2021 and its consistently disciplined approach in deploying capital to expand its fiber network and tracking key capital efficiency indicators such as port utilization ratio which was reported at 28.9% in 2021.
On the other hand, the company’s net debt position, as measured by total financial debt less cash and cash equivalents, perked up from PhP8.451-billion as of September 30, 2021 to PhP11.762-billion as of December 31, 2021. The company availed of a total of PhP10.818-billion in new debt in 2021 offset by repayments and amortizations amounting to PhP2.286-billion.
During the fourth quarter of 2021, almost 13,500 kilometers of fiber optic cable were added to Converge’s backbone, the longest quarterly backbone expansion so far. As of end-2021, the company’s backbone has expanded to more than 103,000 kilometers, almost double its end-2020 backbone length of 55,000 kilometers. The network has passed through 495 cities and municipalities nationwide as of December 31, 2021. The company has soft launched in multiple areas in the Visayas and Mindanao, including Bukidnon, Agusan del Norte, and Bohol in the first quarter of 2022.
Converge also completed it domestic submarine cable project that connects the country’s major islands from Luzon to the Visayas and Mindanao through it national fiber backbone during the fourth quarter of 2021. This is supported by 20 cable landing stations across the archipelago. The 1,800-kilometer subsea cable, which made its final landing in Coron, Palawan, was designed to provide redundancy in the network, assuring service availability even in the case of fiber cuts.
In December 2021, Converge completed the Mindanao redundancy loop that runs through the region, further strengthening the 103,000-kilometer pure fiber backbone. The redundancy loop is a network structure that fortifies the primary route of the network by adding a secondary path for data to pass through in case of a failure in the main route. This makes sure there’s no service downtime and the connection of our subscribers remains unhampered.
“As we continue to pursue our Go National strategy through 2022, we want to make sure that we have high service availability for our subscribers in Visayas and Mindanao. With the redundancy ring completed, we’re significantly reducing the chances of service outages since we now have an alternative network route in place. The whole Philippine digital highway is now strongly protected against cable breaks,” said Dennis Anthony Uy, CEO and co-founder of Converge.
