Acceleration Of Residential Subscriber Additions Results In Converge 39.7% YoY Revenue Growth
The Philippines’ only pure-play high-speed fixed broadband operator, Converge Information and Communications Technology Solutions, Inc. (PSE: CNVRG) (“Converge”) ended 1Q2022 with 1,802,202 residential subscribers, a 52.5% increase from March 2021.
Photo Insert: Dennis Anthony H. Uy, Founder and CEO, Converge
The Company deployed 643,528 new fiber-to-the-home (“FTTH”) ports during the first three months of this year, fastest among the local players in the industry. As of March 31, 2022, Converge’s nationwide network reached more than 12.2 million homes, representing a 47.3% household coverage, on track to reach the Company’s accelerated target to cover approximately 55% of households in the Philippines by 2023.
Consolidated revenues grew by 39.7% from P5,547 million in 1Q2021 to P7,748 million in 1Q2022. Revenues from its residential business grew by 42.0% from P4,797 million to P6,812 million during the same period, driven by a 52.5% YoY growth in our subscriber base.
Average monthly revenue per user (“ARPU”) declined to P1,243 in 1Q2022 due to among others rebates awarded to subscribers who were not provided broadband in the areas affected by Typhoon Odette. On the other hand, enterprise revenues grew by 25.1% YoY, from P749.7 million to P938.2 million during the same period, mostly from the strong growth in the small and medium enterprise (“SME”) segment, marking further revenue acceleration of our enterprise business.
During the first three months of 2022, Converge had 187,594 quarterly gross adds, 14.9% higher than the 4Q2021 gross adds. This growth was due to our efforts in aligning with market strategies of waiving installation fees in some of its operating areas.
Gross adds grew despite the adverse impact of Typhoon Odette in certain cities in Visayas and Mindanao, where aggressive expansion was halted due to the focus on the repair of affected equipment. On the other hand, churn rates have grown to 1.47% in 1Q2022, higher than the 1.16% in 1Q2021, resulting in quarterly net adds of 110,652.
Converge has been implementing various controls and measures to manage churn, including stricter onboarding requirements in selected areas with high churn blacklisting of previously delinquent subscribers, and implementing a payment reminder pop-up on browsers of subscribers with overdue bills.
Reflecting the high unserved demand for fixed broadband connectivity services in the Philippines, it estimates that c. 95% of its new subscribers nationwide in 1Q2022 continue to be first-time fixed broadband users.
Revenues from its enterprise business grew by 25.1% YoY, marking a further acceleration from the 10.7% YoY revenue growth in FY2021. The revenues from SME business grew by 118.2% on the back of a growing customer base. Compared to 1Q2021, SME customers grew by almost 200%, reaching 25,810 customers as of March 31, 2022.
Converge achieved an EBITDA of P4,558 million in 1Q2022, 49.4% higher than the previous year. As a result, Converge was able to improve its record consolidated EBITDA margin to 58.8% in 1Q2022, higher than the 55.0% in 1Q2021.
Despite higher gross installs in 1Q2022 compared to the same period last year, network materials and supplies costs declined, reducing the account’s cost margin from 8% to 5%. This is due to lower unit costs of our network materials and supplies.
Bandwidth and leased line costs continue to decline year-on-year from P277 million in 1Q2022 to P258 million in 1Q2021 as the Company relies more on capacities from invested international cable lines rather than the short-term leases. This resulted in to cost margin reduction from 5% to 3%.
Net income after tax grew from P1,549 million in 1Q2021 to P1,970 million in 1Q2022, resulting in Net Income margins of 25.4% in line with our Net Income margins of 4Q2021.
As expected, depreciation and amortization increased by 66.9% year-on-year due to the aggressive expansion of the Company’s infrastructure in the previous years. Depreciation and amortization margins grew from 14.0% to 16.8% from 1Q2021 to 1Q2022. Finance costs also grew by 83.1% due to higher outstanding loans as of 1Q2022 – mainly used for the aforementioned infrastructure expansion.