Chunghwa Telecom Reports Consolidated Operating Results for the First Quarter 2011

Taipei, Taiwan, April 28, 2011 /PRNewswire-Asia-FirstCall/ -- Chunghwa Telecom Co., Ltd. (TAIEX: 2412, NYSE: CHT) ("Chunghwa" or "the Company") today reported its operating results for the first quarter of 2011. All figures were prepared in accordance with generally accepted accounting principles in the Republic of China ("ROC GAAP") on a consolidated basis.

(Comparisons, unless otherwise stated, are to the prior year period)

First Quarter 2011 Financial Highlights

• Total consolidated revenue increased by 5.8% to NT$52.48 billion
• Mobile communications revenue increased by 2.8% to NT$22.84 billion; mobile value-added services (VAS) revenue increased by 38.6% to NT$3.52 billion
• Internet revenue increased by 3.6% to NT$6.08 billion; internet VAS revenue increased by 17.1% to NT$0.57 billion
• Domestic fixed communications revenue increased by 11.6% to NT$19.20 billion
• International fixed communications revenue decreased by 4.5% to NT$3.79 billion
• Total operating costs and expenses increased by 10.9% to NT$38.53 billion
• Net income totaled NT$11.84 billion, representing a 1.9% decrease
• Basic earnings per share (EPS) increased by 21% to NT$1.5

Dr. Shyue-Ching Lu, Chairman and Chief Executive Officer of Chunghwa Telecom, said, "We are pleased to report a solid performance in the first quarter of 2011. Total consolidated revenue reached NT$52.48 billion, with growth continuing to be driven by higher fixed line revenue resulting from the shift in the pricing right of a fixed to mobile call from mobile operators to fixed network operators, as well as strong mobile value added service ("VAS") and handset sales. During the quarter, we continued to grow our traditional telecom service business, as well as gaining new Information and Communication Technology ("ICT") contracts. In order to leverage our strength in ICT, we have established a wholly owned subsidiary in China to function as an ICT solution provider. Looking ahead, we remain focused on pursuing growth by maintaining our operational focus on broadband, VAS, innovation and integration, at the same time as expanding our overseas business."

Revenue

Chunghwa's total consolidated revenue for the first quarter of 2011 increased by 5.8% year-over-year to NT$52.48 billion, of which 43.5% was from the mobile business, 11.6% was from the internet business, 36.6% was from the domestic fixed business, 7.2% was from the international fixed business, and the remainder was from others. Despite the National Communications Commission ("NCC") tariff reduction that came into effect on April 1, 2010, Chunghwa maintained its growth pattern, due mainly to an increase in mobile VAS, handset sales and internet services.

For the mobile business, total revenue for the first quarter 2011 amounted to NT$22.84 billion, representing a year-on-year increase of 2.8%, mainly due to growth in mobile VAS revenue relating to smartphone promotions and handset sales which offset the decline in mobile voice revenue. The decline of mobile voice revenue was primarily resulting from the shift of pricing right for fixed to mobile calls from mobile to fixed operators.

Chunghwa's internet business revenue increased by 3.6% year-over-year to NT$6.08 billion in the first quarter of 2011, mainly attributable to growth in the number of broadband subscribers and the migration of Asymmetric Digital Subscriber Line ("ADSL") subscribers to fiber solutions.

For the first quarter of 2011, domestic fixed revenue totaled NT$19.20 billion, representing an increase of 11.6% year-over-year. Local revenues increased by 24.3% year-over-year, mainly due to the shift in pricing right for fixed to mobile calls. The 13.2% decline in Domestic Long Distance ("DLD") revenues was due to mobile and Voice over Internet Protocol ("VOIP") substitution, as well as reflecting the mandated tariff reduction.

Broadband access revenue, including ADSL and Fiber to the x ("FTTx"), increased by 3% year-over-year to NT$5.23 billion. Although ADSL access revenue decreased as more ADSL subscribers migrated to fiber solutions, the decrease was fully offset by growth in FTTx access revenue.

International fixed revenue decreased by 4.5% to NT$3.79 billion, primarily due to the decrease in leased line revenue and satellite service revenue resulting from the expiration of the ST-1 contract at the end of January 2011.Other revenue increased by 58.1% year-over-year to NT$0.56 billion.

Costs and Expenses

Total operating costs and expenses for the first quarter of 2011 amounted to NT$38.53 billion, an increase of 10.9% compared to the same period of 2010. This increase was mainly due to the increase in interconnection costs and transition fees resulting from the shift in pricing right of fixed-to-mobile calls, the higher cost of handsets sold and the early retirement expense.

Income Tax

Income tax expense for the first quarter of 2011 was NT$2.32 billion, representing a 21.9% decrease compared to NT$2.97 billion for the same period of 2010. This decline resulted from the lower corporate income tax rate that was applied because the government originally reduced the corporate income tax rate from 25% to 20% in the beginning of 2010, then further reduced it to 17% in the second quarter of 2010.

EBITDA and Net Income

For the first quarter of 2011, EBITDA decreased by 6.6% to NT$22.00 billion and income from operations decreased by 6.3% to NT$13.94 billion, reflecting the negative impact on income from operations resulting from the shift in the pricing right of fixed to mobile calls, the increase in cost of handsets sold and the early retirement expense.

The EBITDA margin for the first quarter of 2011 was 41.9% compared to 47.5% in the same period of 2010, and the operating margin was 26.6%, compared to 30.0% in the previous year. Net income decreased by 1.9% year-over-year to NT$11.84 billion. Earnings per share increased by 21% year-over-year to NT$1.5, primarily because of the capital reduction in January 2011, which reduced the total number of outstanding shares by 20%.

Capital Expenditure ("Capex")

Total capex for the first quarter of 2011 amounted to NT$4.38 billion, a 5% increase year- over-year. Of the NT$4.38 billion capex figure, 57.1% was used for the domestic fixed communications business, 21.0% was for the mobile business, 14.3% was for internet business, 5.9% was for international fixed communications business and the remainder was for other uses.

Cash Flow
Cash flow from operating activities for the first quarter of 2011 decreased by 38.2% year-over-year to NT$9.7 billion, mainly due to Chunghwa's decision to bring its billing period for monthly fees in line with that for communication charges starting from January 2011.

Business and Operational Highlights

Broadband/HiNet

• Total broadband subscribers amounted to 4.4 million as of March 31, 2011. Although broadband subscribers remained relatively flat, the Company's initiatives to encourage FTTx migration yielded solid results, with FTTx subscribers as a percentage of total broadband subscribers increasing from 40.4% at the end of March 2010 to 48.1% at the end of March 2011. In the first quarter of 2011, FTTx revenue reached 63.2% of total broadband access revenue.

• HiNet broadband subscribers totaled 3.61 million at the end of March 2011, a year-over-year rise of 1.9%.

Mobile

• As of March 31, 2011, Chunghwa had 9.78 million mobile subscribers, an increase of 4.5% compared to 9.36 million at the end of Mach 2010.
• Chunghwa gained 177 thousand net additions to its 3G subscriber base during the first quarter of 2011, recording 13.7% year-over-year growth and bringing the total to 5.60 million as of March 31, 2011.
• Mobile VAS revenue for the first quarter of 2011 rose 38.6% year-over-year to NT$3.52 billion, with mobile Internet revenue increasing 88.0% year-over-year, making it the largest contributor to VAS revenue.

Domestic/International Fixed-line

• As of the end of March 2011, the Company maintained its leading fixed-line market position, with fixed-line subscribers totaling 12.29 million.

Financial Statements

Financial statements and additional operational data can be found on the Company's website at www.cht.com.tw/ir/filedownload.

NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Statements that are not historical facts, including statements about Chunghwa's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement.  Investors are cautioned that actual events and results could differ materially from those statements as a result of a number of factors including, but not limited to the risks outlined in Chunghwa's filings with the U.S. Securities and Exchange Commission on Forms F-1, F-3, 6-K and 20-F, in each case as amended.  The forward-looking statements in this press release reflect the current belief of Chunghwa as of the date of this press release and Chunghwa undertakes no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such date, except as required under applicable law.

This press release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.

SPECIAL NOTE REGARDING NON-GAAP FINANCIAL MEASURES

A body of generally accepted accounting principles is commonly referred to as "GAAP". A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows but excludes or includes amounts that would not be so adjusted in the most comparable U.S. GAAP measure. We disclose in this report certain non-GAAP financial measures, including EBITDA. EBITDA for any period is defined as consolidated net income (loss) excluding (i) depreciation and amortization, (ii) total net comprehensive financing cost (which is comprised of net interest expense, exchange gain or loss, monetary position gain or loss and other financing costs and derivative transactions), (iii) other expenses, net, (iv) income tax, (v) cumulative effect of change in accounting principle, net of tax and (vi) (income) loss from discontinued operations.

In managing our business we rely on EBITDA as a means of assessing our operating performance. We believe that EBITDA can be useful to facilitate comparisons of operating performance between periods and with other companies because it excludes the effect of (i) depreciation and amortization, which represents a non-cash charge to earnings, (ii) certain financing costs, which are significantly affected by external factors, including interest rates, foreign currency exchange rates and inflation rates, which have little or no bearing on our operating performance, (iii) income tax (iv) other expenses or income not related to the operation of the business.

EBITDA is not a measure of financial performance under U.S. GAAP or ROC GAAP. EBITDA should not be considered as an alternate measure of net income or operating income, as determined on a consolidated basis using amounts derived from statements of operations prepared in accordance with U.S. GAAP or ROC GAAP, as an indicator of operating performance or as cash flows from operating activity or as a measure of liquidity. EBITDA has material limitations that impair its value as a measure of a company's overall profitability since it does not address certain ongoing costs of our business that could significantly affect profitability such as financial expenses and income taxes, depreciation, pension plan reserves or capital expenditures and associated charges. These non-GAAP measures are not in accordance with or an alternative for GAAP financial data, the non-GAAP results should be reviewed together with the GAAP results and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies.

About Chunghwa Telecom

Chunghwa Telecom (TAIEX 2412, NYSE: CHT) is Taiwan's leading telecom service provider. The Company provides fixed-line, mobile and Internet and data services to residential and business customers in Taiwan.

SOURCE Chunghwa Telecom Co., Ltd.