Chunghwa Telecom Reports Consolidated Operating Resultsfor the Second Quarter and First Half of 2011

^{Published on 2011-08-26 01:00:52 - Market Wire}
 

Chunghwa Telecom Reports Consolidated Operating Resultsfor the Second Quarter and First Half... -- TAIPEI, Taiwan, Aug. 26, 2011 /PRNewswire-Asia-FirstCall/ --

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TAIPEI, Taiwan, Aug. 26, 2011 /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 2011. All figures were prepared in accordance with generally accepted accounting principles of the Republic of China ("ROC GAAP") on a consolidated basis.

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

Second Quarter 2011Financial Highlights

• Total consolidated revenue increased by 9.6% to NT$54.42 billion
• Mobile communications revenue increased by 1.1% to NT$22.35 billion; mobile value-added services (VAS) revenue increased by 42% to NT$3.77 billion
• Internet revenue increased by 3.4% to NT$6.25 billion; internet VAS revenue increased by 13.9% to NT$0.67 billion
• Domestic fixed communications revenue increased by 14.1% to NT$19.78 billion
• International fixed communications revenue increased by 3.9% to NT$3.86 billion
• Total operating costs and expenses increased by 12.3% to NT$39.01 billion
• Net income totaled NT$13.30 billion, representing a 2.8% increase
• Basic earnings per share (EPS) increased by 27.6% to NT$1.71

First Half 2011 Financial Highlights

• Total consolidated revenue increased by 7.7% to NT$106.9 billion
• Mobile communications revenue increased by 1.9% to NT$45.20 billion; mobile VAS revenue increased by 40.4% to NT$7.29 billion
• Internet revenue increased by 3.5% to NT$12.33 billion; internet VAS revenue increased by 15.4% to NT$1.24 billion
• Domestic fixed communications revenue increased by 12.9% to NT$39.0 billion
• International fixed communications revenue decreased by 0.4% to NT$7.65 billion
• Total operating costs and expenses increased by 11.6% to NT$77.54 billion
• Net income totaled NT$25.13 billion, representing a 0.6% increase
• Basic EPS increased by 24.4% to NT$3.21

Dr. Shyue-Ching Lu, Chairman and Chief Executive Officer of Chunghwa Telecom, said, "I'm pleased to report that continued business expansion enabled us to achieve revenues of NT$54.4 billion during the second quarter 2011. Higher fixed line revenue resulting from the shift in pricing right of a fixed to mobile call from mobile to fixed network operators continued to be a key growth driver, as did mobile VAS and handset sales.

"Our desire to build on this top-line growth and leverage our reputation for innovative offerings and premium customer service led to the launch of our "Digital Rainforest" initiative during the second quarter. This initiative builds on the significant traction we have already gained from our inroads into the digital business ecosystem, and represents a cohesive strategy for integrating and reinvigorating our activities within this space. Key elements of "Digital Rainforest" include a cloud computing initiative called hicloud PaaS, a cutting edge broadband service, integrated service platforms, and domestic and international collaboration on reducing carbon emissions to promote sustainability. We are also implementing our new channel strategy by transforming our service centers to convey our new image as we embrace the cloud computing era. I am confident that this "Digital Rainforest" initiative will provide additional momentum to our growth going forward."

Revenue

Chunghwa's total consolidated revenue for the second quarter of 2011 increased by 9.6% year-over-year to NT$54.42 billion, of which 41.1% was from the mobile business, 11.5% was from the internet business, 36.3% was from the domestic fixed business, 7.1% 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 succeeded in maintaining its growth momentum, due mainly to an increase in fixed line revenue resulting from the shift in the pricing right of a fixed-to-mobile call from the mobile operator to fixed network operator, as well as mobile VAS and handset sales. In addition, construction revenue from the Company's property development subsidiary also contributed to Chunghwa's revenue growth.

Total revenue for the mobile business amounted to NT$22.35 billion for the second quarter 2011, representing a year-on-year increase of 1.1%, mainly due to growth in mobile VAS revenue and handset sales relating to smartphone promotions, which offset the decline in mobile voice revenue. The decline in mobile voice revenue resulted primarily from the shift in pricing right for fixed to mobile calls from mobile to fixed operators.

Chunghwa's internet business revenue increased by 3.4% year-over-year to NT$6.25 billion in the second 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 second quarter of 2011, domestic fixed revenue totaled NT$19.78 billion, representing an increase of 14.1% year-over-year. Local revenues increased by 33.6% year-over-year, mainly due to the shift in pricing right for fixed to mobile calls. The 13.9% 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$5.14 billion. Although ADSL access revenue decreased as more ADSL subscribers migrated to fiber solutions and because of the mandated tariff reduction, the decrease was fully offset by growth in FTTx access revenue.

International fixed line revenue increased by 3.9% to NT$3.86 billion, primarily due to growth in international long distance service and international leased line revenue.

Other revenue grew by 369.3%, primarily due to the increase in construction revenue from our property development subsidiary.

For the first half of 2011, total revenue was NT$106.9 billion, a 7.7% increase compared to the same period last year. Of this total, 36.5% was contributed by the domestic fixed business, 42.3% was from the mobile business, 11.5% was from the Internet business, the international fixed business accounted for 7.2%, and the remainder was from others.

Costs and Expenses

Total operating costs and expenses for the second quarter of 2011 amounted to NT$39.0 billion, an increase of 12.3% 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, as well as higher costs of handsets sold.

Total operating costs and expenses for the first half of 2011 increased by 11.6% year-over-year to NT$77.54 billion, due mainly to the same reasons as for the second quarter.

Income Tax

Income tax expense for the second quarter of 2011 was NT$2.32 billion, representing a 19.7% increase, compared to NT$1.94 billion for the same period of 2010. The decrease is because in June 2010, the government reduced the income tax rate from 20% to 17% and the reduction of income tax expense for the first half 2010 was fully reflected in June 2010.

EBITDA and Net Income

EBITDA for the second quarter of 2011 remained flat, at NT$23.42 billion. Income from operations increased by 3.4% to NT$15.41 billion, reflecting the higher revenue.

The EBITDA margin for the second quarter of 2011 was 43.02% compared to 47.33% in the same period of 2010, and the operating margin was 28.3%, compared to 30.0% in the previous year. Net income increased by 2.8% year-over-year to NT$13.30 billion. Earnings per share increased by 27.6% year-over-year to NT$1.71, primarily due to the higher net income and the capital reduction in January 2011, which reduced the total number of outstanding shares by 20%.

Capital Expenditure ("Capex")

Total capex for the second quarter of 2011 amounted to NT$5.54 billion, a 7.6% year-over-year increase. Of the NT$5.54 billion capex figure, 57.1% was used for the domestic fixed communications business, 21.0% was for the mobile business, 14.3% was for the internet business, 5.9% was for the international fixed communications business, and the remainder was for other uses.

Cash Flow
Cash flow from operating activities for the second quarter of 2011 decreased by 5.6% year-over-year to NT$16.28 billion, mainly due to higher performance-based bonus payout relating to increased net income for year 2010.

Business and Operational Highlights

Broadband/HiNet

• As of June 30, FTTx subscribers had reached 2.2 million, accounting for 49.7% of total broadband users. This year, the Company is continuing to execute on its strategy to encourage FTTx migration. On June 22, the Company further reduced its broadband service tariffs, especially for speeds of 20Mbps and 50Mbps to stimulate the momentum of migration and subscription. The initiative has been very well received.  
• HiNet broadband subscribers totaled 3.63 million at the end of June 2011, a year-over-year rise of 2.2%.  

Mobile

• As of June 30, 2011, Chunghwa had 9.86 million mobile subscribers, an increase of 4.4% compared to 9.45 million at the end of June 2010.
• As of June 30, 2011, the Company had 1.15 million mobile internet subscribers, demonstrating strong growth momentum compared to 809 thousand subscribers as of December 2010. As a result, the Company has set a new year-end mobile internet subscriber target of1.4 million.
• Mobile VAS revenue for the second quarter of 2011 rose 42% year-over-year to NT$3.77 billion, with mobile Internet revenue increasing 87.2% year-over-year, making it the largest contributor to VAS revenue.

Domestic/International Fixed-line

• As of the end of June 2011, the Company maintained its leading fixed-line market position, with fixed-line subscribers totaling 12.27 million.
• As of August 26, 2011, Chunghwa's Multimedia-on-demand (MOD) subscriber number has reached over 930 thousand and continues to rise, suggesting that the enriched content is meeting customer needs.

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.

RELATED LINKS
[ http://www.cht.com.tw/ir/filedownload ]