Converge ICT Solutions Inc. on Thursday reported net income falling 33 percent in the fourth quarter last year due to “poor quality” of subscribers acquisition and higher financing and operating costs.
The country’s only pure-play high-speed fixed broadband operator posted a net income of P1.33 billion in the October-to-December period from P1.96 billion last year.
For the full year, the company posted a net income of P7.43 billion, up 4 percent from P7.15 billion in 2021.
Christine Renee Blabagno, deputy chief finance officer at Converge, blamed the decline in net income in the fourth quarter to the “poor quality subscribers acquisition” in early part of 2022 who have churned, as well as on higher financing costs.
The company recorded a high churn rate of 2.49 percent in the second quarter and 1.96 percent in the third quarter last year.
Its consolidated revenues grew 27 percent to P33.69 billion last year from P26.47 billion in 2021. In the fourth quarter alone, the company posted revenues reaching P9.21 billion, up 20 percent from P7.64 billion.
Revenues from its residential business grew 27.4 percent to P29.46 billion from P23.12 billion, driven by an 11 percent year-on-year growth in subscriber base. The company ended last year with a total 1.88 million residential subscribers.
Enterprise revenues also grew 26.4 percent year-on-year to P4.23 billion from P3.35 billion, mostly from the strong revenue growth in the small and medium enterprise and wholesale segments.
The company incurred a 257 percent increase in financing costs to P1.7 billion last year from P486 million in 2021. In the fourth quarter alone, its financing cost totaled to P551 million, up 1,365 percent from only P38 million in the same period last year.
General and administrative expenses amounted to P6.6 billion, up 38 percent from P4.77 billon in 2021.
Maria Grace Uy, co-founder and president of Converge said the company projects residential revenues to grow by around 10 percent this year on strong demand from key expansion areas in the Visayas and Mindanao area.
She also said that Converge anticipates demand from enterprise customers to grow by 25 percent this year as the economy reopens and enterprises further undertake a shift to on-site work arrangements.
On the back of continued growth from residential and enterprise segments, Uy said consolidated revenue were to grow between 10 percent to 15 percent this year.
Uy said Converge will spend P12 billion to P15 billion in capital expenditures this year, which will focus on deployment in key expansion areas in Visayas and Mindanao.
Other key capital expenditure initiatives this year include investments into international subsea cables and the acquisition of core network equipment to further bolster the redundancy of their domestic fiber network
The company deployed 312,000 new fiber-to-the-home ports during the last quarter of 2022, culminating in an end-of-year port count of approximately 7.9 million.
As of December 31, 2022, Converge’s nationwide network reached more than 14.9 million homes, representing a 56.2 percent household cover, already surpassing its accelerated target to cover approximately 55 percent of households in the Philippines by 2023.
