Chunghwa Telecom reports Operating Results for full year 2008 (Taiwan)
Chunghwa Telecom Co., Ltd (NYSE: CHT; TAIEX: 2412) (“Chunghwa” or “the Company”), today reported its operating results for full year 2008.
Financial Highlights for Full Year 2008:
- Total revenue increased by 2.2% to NT$201.7 billion
- Internet and data revenue grew by 1.7%
- Mobile revenue decreased 1.9%; Mobile VAS revenue increased by 25.0%
- Net income totaled NT$45.0 billion, a decrease of 6.7%
- Earnings per share (EPS) decreased by 6.1% to NT$4.64, or NT$46.4 per ADS
Financial Highlights for 4Q08:
- Total revenue decreased by 0.3% to NT$49.8 billion
- Internet and data revenue grew by 2.6%
- Mobile revenue decreased 1.4%; Mobile VAS revenue increased by 19.8%
- Net income totaled NT$8.5 billion, a decrease of 18.9%
- Earnings per share (EPS) decreased by 23.7% to NT$0.82, or NT$8.2 per ADS
Revenue
Chunghwa’s total revenue for 2008 increased by 2.2% year-over-year to NT$201.7 billion, of which 28.3% was from fixed-line services, 35.9% was from mobile services, 24.8% was from Internet and data services, and the remainder consisted of handset revenue, data card sales and the consolidated revenue of Senao International (“Senao”).
While Internet and data businesses contributed positively to the overall revenue, revenue growth was mainly driven by the full 12 months consolidation of Chunghwa’s subsidiary Senao, compared to only 8.5 months of consolidated Senao’s operational results for 2007.
Internet and data revenue in 2008 was 1.7% higher than in 2007, primarily driven by the increased broadband subscriber base and the successful initiatives in upgrading the customers to higher speed fiber services. However, this growth was partly offset by an ADSL tariff adjustment that took effect on April 1, 2008. For mobile business, Chunghwa made progress by increasing the subscriber numbers by 2.9% and by enhancing the VAS service revenues by 25.0% compared to 2007. However, these successes were offset by the traffic decline and the price cuts imposed by the National Communications Commission (or “NCC”), which resulted in an overall revenue decline of 1.9% year-over-year. Fixed-line revenue decreased by 3.4% year-over-year to NT$57.1 billion for 2008. Local and Domestic long distance revenues decreased by 3.3% and 6.8%, respectively, year-over-year for 2008, mainly due to mobile and VOIP substitution. International long distance revenues decreased by 1.4% compared to 2007. This was primarily because of the increased competition from prepaid calling card and the decrease in international direct dial traffic. Other revenue increased over 44%, mostly from the consolidation of Senao.
For the fourth quarter of 2008, total revenue was NT$49.8 billion, a 0.3% decrease over the same period last year. Internet and data revenue was 2.6% higher than the same period last year. Mobile revenue decreased by 1.4%, mainly due to the decrease in traffic. Fixed line revenue as a whole decreased by 2.4% as compared to the same period last year.
Costs and expenses
For 2008, total operating costs and expenses increased year-over-year by 4.4% to NT$143.0 billion, primarily due to the consolidation of Senao’s operating costs and expenses for the full year, compared to only 8.5 months of consolidated Senao’s operating costs and expenses for 2007. For the parent company, total operating costs and expenses increased by NT$2.9 billion, representing a year-over-year increase of 2.3%. This was primarily because of the increase in handset sale costs, handset subsidies and the employee bonus expenses. However, depreciation and amortization expense for the parent company was 4.3% lower than 2007.
For the fourth quarter of 2008, total operating costs and expenses increased by 1.9% to NT$38.1 billion, mainly due to the increase in personnel cost resulted from the expensing of the employee bonus.
Income tax
The Company’s income tax for 2008 was NT$13.9 billion, a 6.4% increase compared to NT$13.1 billion for 2007. This was mainly due to the decrease in tax credit.
EBITDA and net income
EBITDA for 2008 decreased by 3.4% year-over-year to NT$96.8 billion, resulting in an EBITDA margin of 48.0%, down from 50.8% for 2007. The EBITDA margin decline was primarily attributed to the increase of handset subsidy, cost of handset sales for the parent company and the full year consolidation of Senao, which operates at a lower margin than the parent company.
Net income for 2008 was NT$45.0 billion, a decrease of 6.7% year-over-year. The reasons for such decline were due to the increase in operating costs and expense, as well as the NT$1.2 billion financial asset impairment in the fourth quarter 2008 and the NT$1.7 billion employee bonus which started to be expensed in 2008.
Capex
Capital expenditures totaled NT$30.1 billon for 2008 compared to NT$25.1 billion for 2007. The 20.1% increase of capex in 2008 was mainly for the deployment of the next generation network. Going forward, Chunghwa expects the capex spending to remain between NT$30billion to NT$32billion over the next 2 to 3 years.
These future capex investments will focus on core businesses and on migrating mobile and broadband customers to higher performance platforms.
Cash Flows
Cash flow from operating activities increased by 3.3% to NT$91.9 billion. The increase was primarily because of a decrease in other financial assets and an increase in accounts payable. Free cash flow for 2008 decreased by 3.4% compared with 2007 as capex increased by 20.1%. Still, the cash and cash equivalents remained solid at NT$81.3 billion as of the end of 2008.
For the fourth quarter of 2008, cash flow from operating activities increased by 12.1%. This increase was primarily due to the decrease in other financial assets and the increase in other current liabilities.
Business Performance Highlights:
Internet and Data Services
- By the end of 2008, Chunghwa Telecom had 410 million HiNet subscribers, a 0.5% increase year-over-year. Overall, the Company had 4.3 million broadband subscribers (including ADSL and FTTB) at the end of 2008, a 1.4% increase as compared to the end of 2007. By the end of 2008, FTTx subscriptions with an average service speed of 10 Mbps reached 1.07 million, representing 24.8% of total broadband subscribers.
- As of the end of 2008, Chunghwa had 676 thousand MOD subscribers, a solid 71.4% year-over-year increase.
Mobile Services
- As of December 31, 2008, Chunghwa had 8.95 million mobile subscribers, slightly up by 0.87% quarter-over-quarter compared to 8.87 million as of September 31, 2008.
- Chunghwa remained the leading mobile operator in Taiwan. According to statistics published by the NCC, at the end of 2008, the Company’s total subscriber market share (including 2G, 3G and PHS) was 35.2%, while the revenue market share was 33.5%, respectively.
- Chunghwa had 322 thousand net additions to its 3G subscriber base during the fourth quarter 2008, representing an increase of 9.9% quarter-over-quarter resulting in a total number of 3G subscribers of 3.56 million as of December 31, 2008.
- Mobile VAS revenue for 2008 was NT$7.0 billion, representing a 25.0% increase year-over-year, including the increase of SMS revenue by 20.5% and the increase of mobile Internet revenue by 38.5%.
About Chunghwa Telecom
Chunghwa Telecom (NYSE: CHT; TAIEX 2412) is the leading telecom service provider in Taiwan. Chunghwa Telecom provides fixed-line, mobile and Internet and data services to residential and business customers in Taiwan.
For more information, please visit http://www.cht.com.tw/
