Chunghwa Telecom Reports Operating Results for the Second Quarter and First Half of 2010
TAIPEI, Taiwan, Aug. 26 /PRNewswire-Asia-FirstCall/ -- Chunghwa Telecom Co., Ltd. (TAIEX: 2412, NYSE: CHT) ("Chunghwa" or "the Company"), today reported its operating results for the second quarter and first half of 2010. All figures were presented on a consolidated basis and prepared in accordance with generally accepted accounting principles in the Republic of China ("ROC GAAP").
Dr. Shyue-Ching Lu, Chairman of Chunghwa Telecom, said, "I am pleased to report another quarter of solid results, boosted by the continuing economic recovery and the execution of our marketing initiatives. Despite the mandated National Communications Commission ("NCC") tariff reduction effective April 1 this year, consolidated revenue increased 3.3% to NT$49.7 billion during the second quarter of 2010, mainly due to higher handset sales and increased revenue from both mobile value-added services ("VAS") and Internet services. Our prudent cost management initiatives enabled us to deliver stable operating income, and the income tax reduction from 25% to 17% starting from 2010 resulted in a 12.7% year-over-year rise in net income to NT$12.9 billion."
(Comparisons, unless otherwise stated, are to the prior year period) Financial Highlights for the Second Quarter of 2010: -- Total consolidated revenue increased by 3.3% to NT$49.7 billion -- Mobile communications business revenue increased by 6.5% to NT$22.1 billion; mobile value added revenue increased by 31.4% to NT$2.7 billion -- Internet business revenue increased by 7.0% to NT$6.0 billion -- Domestic fixed communications business revenue decreased by 1.1% to NT$17.3 billion; broadband access revenue increased by 1.9% to NT$5.0 billion -- International fixed communications business revenue decreased by 2.3% to NT$3.7 billion -- Total operating costs and expenses increased by 4.9% to NT$34.8 billion -- Net income totaled NT$12.9 billion, representing an increase of 12.7% -- Basic earnings per share (EPS) increased by 12.7% to NT$1.34 Financial Highlights for the First Half of 2010: -- Total consolidated revenue increased by 2.2% to NT$99.3 billion -- Mobile communications business revenue increased by 4.2% to NT$44.3 billion -- Internet business revenue increased by 4.5% to NT$11.9 billion -- Domestic fixed communications business revenue decreased by 2.0% to NT$34.5 billion; broadband access revenue increased by 1.5% to NT$10.1 billion -- International fixed communications business revenue increased by 3.4% to NT$7.7billion -- Total operating costs and expenses increased by 2.0% to NT$69.5 billion -- Net income totaled NT$25.0 billion, representing an increase of 12.3% -- Basic EPS increased by 12.3% to NT$2.58
Revenue
Chunghwa's total consolidated revenue for the second quarter of 2010 increased by 3.3% year-over-year to NT$49.7 billion, of which 34.9% was from its domestic fixed business, 44.5% was from its mobile business, 12.2% was from its Internet business, 7.5% was from its international fixed business and the remainder was from other business segments. The primary reasons for the year-over-year increase were the economic recovery and the Company's marketing efforts.
Domestic fixed line business revenue totaled NT$17.3 billion, representing a decrease of 1.1% year-over-year. Of this, local revenues decreased by 2.2% year over year to NT$8.1billion, mainly due to mobile and Voice over Internet Protocol (VOIP) substitution. The 12.6% decline in domestic long-distance revenues to NT$1.7 billion was also due to mobile and VOIP substitution, and the interconnection fee adjustment at the end of 2009.
Broadband access revenue, including ADSL and FTTx, increased by 1.9% year over year to NT$5.0 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. Chunghwa believes that this migration will continue as customers continue to demand increased bandwidth, and that broadband revenue will therefore increase over time.
Mobile revenue increased by 6.5% year over year to NT$22.1 billion, mainly due to growth in handset sales and mobile VAS revenue related to our smartphone promotion.
Internet revenue increased by 7.0% to NT$6.0 billion, mainly attributable to Internet services growth, which was driven by the increase in broadband subscribers and the migration of ADSL subscribers to fiber solutions.
International fixed line revenue decreased by 2.3% to NT$3.7 billion, mainly due to VOIP substitution and market competition that was partially offset by growth in leased line revenue.
Finally, other revenue increased by 47.9% to NT$0.5 billion in the second quarter of 2010 compared to the same period of 2009, primarily due to the consolidation of subsidiaries.
For the first half of 2010, total revenue was NT$99.3 billion, a 2.2% increase from the same period last year. Of this amount, the domestic fixed business 34.8%, the mobile business contributed 44.7%, the internet business 12.0%, the international fixed business 7.7%, and the remainder was from others.
Costs and Expenses
Total operating costs and expenses for the second quarter of 2010 were NT$34.8 billion, an increase of 4.9% year-over-year, mainly due to the increased cost of handset sales and the performance-based bonus accrual that is related to the net income growth.
Total operating costs and expenses for the first half of 2010 increased 2.0% year over year to NT$69.5 billion, due to the same reason.
Income Tax
Income tax expenses for the second quarter of 2010 were NT$1.9 billion, representing a decrease of 44.9% compared to the same period of 2009. This decrease resulted from the government's income tax rate reduction from 25% to 17% this year. Effect of tax rate reduction from 20% to 17 % for the first quarter 2010 income tax expenses was fully reflected in the second quarter.
EBITDA/Operating income/Net Income
Operating income for the second quarter of 2010 remained flat year-over-year at NT$14.9 billion. EBITDA decreased by 2.3% to NT$23.5 billion, primarily as a result of the mandated NCC tariff reduction and changing cost structure. The Company's EBITDA margin and operating income margin for the second quarter of 2010 were 47.3% and 30.0%, respectively, compared to 50.1% and 31.1%, respectively, for the same period of 2009.
Net income for the second quarter of 2010 increased by 12.7% year-over-year to NT$12.9 billion, primarily due to revenue growth and the lower income tax rate.
For the first half of 2010, operating income amounted to NT$29.8 billion, a rise of 2.6% year over year. EBITDA decreased slightly by 0.7% to NT$47.1 billion. Net income reached NT$25.0 billion, a 12.3% increase, mainly due to the income tax rate reduction.
Capital Expenditure ("Capex")
Total capex for the second quarter of 2010 amounted to NT$5.2 billion, representing a decrease of 7.8% year-over-year. Of the NT$5.2 billion in capex, 63.1% was spent on the domestic fixed communications business, 23.1% on the mobile communications business, 6.8% on the Internet business, 4.8% on the international fixed communications business and the remainder was used for other purposes.
Cash Flow
Cash flow from operating activities for the second quarter of 2010 was NT$17.3 billion, a 5.2% decrease compared to the same period of 2009. As of June 30, 2010, the Company's cash and cash equivalents totaled NT$92.8 billion, an increase of 11.2% year-over-year, still showing a strong cash position.
Businesses Performance Highlights: Domestic Fixed/Broadband/HiNet Business -- As of the end of June 2010, the Company maintained its leading fixed-line market position, with fixed-line subscribers totaling 12.4 million. -- Total broadband subscribers amounted to 4.3 million as of June 30, 2010, accounting for 82.2% of market share. Chunghwa continued its efforts to migrate ADSL subscribers to FTTx solutions. By the end of the second quarter of 2010, there were 1.85 million FTTx subscribers, accounting for 42.8% of Chunghwa's total broadband subscriber base. By the end of the second quarter of 2010, the number of ADSL and FTTx subscribers with a service speed greater than 8 Mbps reached 2.2 million, representing 50.9% of total broadband subscribers, compared to 48.8% at the end of the first quarter of 2010. -- HiNet subscribers totaled 4.07 million at the end of the second quarter of 2010. -- MOD subscriber number is over 720 thousand up to now. Mobile Business -- As of June 30, 2010, Chunghwa had 9.4 million mobile subscribers, an increase of 4.5% compared to 9.0 million at the end of the first half of 2009. -- Chunghwa had 5.1 million 3G subscribers at the end of June 2010, accounting for 53.9% of its total subscriber base. -- Mobile VAS revenue for the first half of 2010 increased 27.6% year-over-year to NT$5.2 billion; Short Message Service revenue rose 6.9% year-over-year and mobile Internet revenue increased 78% year-over-year. -- Smartphone subscription accounted for 17% of total handsets offered by the Company during the first half of 2010. Smartphone Average Revenue per User ("ARPU") was 132% higher than blended ARPU for the same period.
Financial Statements
Financial statements and additional operational data can be found on the Company's website at http://www.cht.com.tw/ir/filedownload .
Note Concerning Forward-looking Statements
Except for statements in respect of historical matters, the statements made in this press release contain "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual performance, financial condition or results of operations of Chunghwa to be materially different from what may be implied by such forward-looking statements. Investors are cautioned that actual events and results could differ materially from those statements as a result of a number of factors including, among other things: extensive regulation of the telecom industry; the intensely competitive telecom industry; Chunghwa's relationship with its labor union; general economic and political conditions, including those relating to the telecom industry; possible disruptions in commercial activities caused by natural and human induced events and disasters, including terrorist activity, armed conflict and highly contagious diseases, such as Severe Acute Respiratory Syndrome; and those risks identified in the section entitled "Risk Factors" in Chunghwa's annual reports on Form F-20 filed with the SEC.
The forward-looking statements in this press release reflect the current belief of Chunghwa as of the date of this press release. The Company undertakes no obligation to update these forward-looking statements for events or circumstances that occur subsequent to the date of this press release.
About Chunghwa Telecom
Chunghwa Telecom (TAIEX 2412, NYSE: CHT) is Taiwan's leading telecom service provider. It provides fixed-line, mobile and Internet services to residential and business customers in Taiwan.
Contact: Fu-fu Shen Tel: +886-2-2344-5488 Email: [email protected]
SOURCE Chunghwa Telecom Co., Ltd.
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