Converge profits more than doubled in H1 on sustained subscribers growth

MANILA, Philippines — Sustained subscriber growth pushed up the earnings of fixed broadband operator Converge ICT Solutions Inc. in the first half, as the pandemic continues to be an unusual tailwind for internet service providers amid a massive shift to remote work and online classes.

Converge’s net income after tax more than doubled year-on-year during the January-June period to P3.3 billion, the company said in a disclosure to the stock exchange on Thursday. Earnings before interest, taxes, depreciation, and amortization (EBITDA) — another measure of financial strength — fattened by 96% on-year to P6.5 billion during the period.

Despite the good news, shares in Converge shed 1.83% to close at P26.85 apiece, tracking a 1.65% slump in the main index.

The impressive financial results show Converge continues to be one of the rare winners in this pandemic, with consolidated revenues growing 81.5% year-on-year to P11.8 billion in the first half. Broken down, the company’s residential business did much of the heavy-lifting during the period, as revenues from its corporate subscribers post modest growth.

Revenues from residential business increased more than twofold to P10.2 billion, driven by 85% annual growth in its subscriber base. As of end-June, Converge’s residential subscribers have grown to 1,355,079 and the company estimates that 95% of its new household customers were first time fixed broadband users.

On the other hand, revenues from Converge’s enterprise business inched up 3.8% year-on-year to P1.6 billion, a decent performance as the pandemic continues to empty big city office buildings. To boost this segment, Converge said it is offering new products especially for small and medium enterprises (SME), helping the company cap the first half with an overall enterprise customer base of 17,539, higher than 10,498 recorded in the same period last year.

“We expect revenue growth from SME to be further accelerated by our expansion in the VisMin area, where we see heightened demand for reliable fiber based connectivity services,” the company said.

“Finance costs were lower in 1H2021 due to repayment of outstanding loans. In addition, with the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill signed into law, our effective corporate income tax rate was reduced to 23.0% during 1H2021,” it added.

Pampanga-based Converge’s ultimate goal is to put the entire archipelago under its network. To do this, the company braved market volatility last year and raised around P13 billion during a closely-watched initial public offering. That mammoth IPO gave Converge an early admission to the 30-member Philippine Stock Exchange index less than a year since listing its shares on the PSE.

Capital raised funded the company’s expansion beyond its Luzon base. According to Converge, it has completed connecting Visayas and Mindanao to its nationwide backbone by adding more than 11,800 kilometers of fiber optic cable in the second quarter of the year. The company’s backbone and distribution network is now almost 76,500 km long.

Converge targets to cover 55% of total households in the Philippines by 2025.