3Q 2010 Operating Results · 2019. 11. 14. · Solid Performance Consolidated Revenue 49.12 48.06...

October 27 , 2010

3Q 2010 Operating Results

© 2010 Chunghwa Telecom 1

DisclaimerNote Concerning Forward-looking StatementsThis 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. Chunghwa may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 20-F and 6-K., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. 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: extensive regulation of telecom industry; the intensely competitive telecom industry; our relationship with our labor union; general economic and political conditions, including those related 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 SARS; and those risks outlined in Chunghwa’s filings with the U.S. Securities and Exchange Commission, including its registration statements on Form F-1, F-3, F-6 and 20-F, in each case as amended. Chunghwa does not undertake any obligation to update any forward-looking statement, except as required under applicable law. This 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 MEASURESA 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 and tax on assets and statutory employee profit sharing, which is similar to a tax on income and (iv) other expenses or income not related to the operation of the business.EBITDA is not a measure of financial performance under 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 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. For more information on these non-GAAP financial measures, please see the tables captioned set forth at the end of this release and which shall be read together with the accompanying financial statements prepared under ROC GAAP.

Solid Performance

Consolidated Revenue

49.12 48.0650.06 51.12 49.62 49.66 50.86

30

35

40

45

50

55

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10 0

5

10

15

20

25

30

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

Operating Income Net Income EBITDA

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

Net Income % EBITDA %

NT$bn NT$bn


3Q 10 Revenue Breakdown (合併)

Others0.9%

DomesticFixed34.7%

Mobile44.4%

Internet12.2%

Int'l Fixed7.8%


Consistent Return to Shareholders

Cash Return

Note:1. The cash return was calculated based on cash

dividend and cash return from capital reduction, stock dividend was not included.

2. 1 ADR = 10 common shares

42.6 34.6 40.7 37.1 39.4

9.7 19.1 9.7

0102030

405060

2006 2007 2008 2009 2010

Normal Dividend Capital Reduction

NT$bn

• Cash dividend for 2009 totaled NT$39.4bn

• Cumulative cash returns of NT$38.5bn to shareholders in the previous three rounds of capital reduction

• 4th capital reduction round approved by The Board and by shareholders at our AGM

– Cash return expected to be NT$19.4bn on Jan. 25, 2011

Business Overview

Broadband Services - Growth Drivers in Fixed-Line

0

1,000

2,000

3,000

4,000

5,000

6,000

3Q 09 4Q 09 1Q 10 2Q 10 3Q 10

FTTx ADSL


Sep 09 Dec 09 Mar 10 Jun 10 Sep 10

FTTx 8Mbps 3Mbps 2Mbps 1Mbps Other

Thousand4,306

35.0%

9.4%

29.8%

8.7%

17.1%

4,304

38.1%

8.7%

28.3%

8.0%

16.9%

4,317

40.4%

27.1%

7.5%

16.6%

8.4%

NT$ mn

PerformanceBroadband Subscribers

4,325

42.8%

25.8%

7.0%

16.3%

8.0%

47.6%

52.4%

51.1%

48.9%

53.9%

46.1%

57.5%

42.5%

720

740

760

780

800

3Q 09 4Q 09 1Q 10 2Q 10 3Q 10

NT$ Broadband ARPUBroadband ARPU

Revenue of Fixed Line BroadbandRevenue of Fixed Line Broadband

8.7%10.3% 10.7%

6.2%

10.2%

05,000

10,00015,00020,00025,000

2007 2008 2009 Jan-Sep 09 Jan-Sep 100%

5%

10%

Revenue VAS %

NT$ mn +2.7%

+6.4%

Internet RevenueInternet Revenue

60.0%

40.0%

4,346

45.1%

23.5%

7.6%

16.1%

7.7%

Aug 10 ADSL Free upgrades

256K→512K

1M→2M

2M→3M

• Launching Family Packages on Apr 15, 2010

9.6

66.4

160.0200.0

0

100

200

300

Apr 10 Jun 10 Sep 10 Dec 10(E)

Su

bsc

rib

er

668 667 665691

900

742

500

600

700

800

900

Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec10(E)

0

50

100

150

3Q 09 4Q 09 1Q 10 2Q 10 3Q 1036.0%

38.0%

40.0%

42.0%

44.0%

46.0%

ARPU HUT


Thousand

Growing Momentum in MOD/ IPTV

• Providing the highest number of HD channels in local market (Ex:ESPN,NGC, eye TV)

• More sport events and life info services to come

MOD/IPTV Subscribers

107 110

15 17

0

100

Oct 10 Dec 10(E)

HD

SD

Performance

NT$

+7.3%

Note：MOD ARPU includes Ads and billing handling income since 2010

Thousand

MOD channelMOD channel

0

1,000

2,000

3,000

4,000

5,000

2008 2009 Jan-Sep09

Jan-Sep10

SMS Wireless Internet Others

02000400060008000

1000012000

J-10 F-10 M-10 A-10 M-10 J-10 J-10 A-10 S-10

Sub

scrib

ers

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

Chu

rn

CHT TWM FETCHT TWM FET

• Maintain mobile leadership byacquiring customers, minimizing churn rate, and increasing user loyalties via compelling user experiences

• Create value via smartphone services

• Increase mobile VAS revenue by offering customized and integrated Hami VAS services with mobile Internet tariff plans over 3.5G+WiFi networks


Thousand

Number One Mobile Services Provider

7.0%9.7%

11.8% 11.5%14.6%

5%

10%

15%

2007 2008 2009 Jan-Sep

09

Jan-Sep

10

VAS Strategies

+80% Mobile Internet

grows 80% yoy

CAGR

22.7%

Highest Subs & Lowest Churn

NT$mn

+29.2

%

: Revenue : Revenue yoyyoy GrowthGrowth

VAS BreakdownVAS BreakdownMobile Mobile VAS Revenue %VAS Revenue %

Smartphone - Value Driver for Mobile

• Smartphone customers account for 23% of the total handsets CHT offered in the first 9 months of 2010

– The percentage is expected to reach 25% by 2010

Performance

• Focus on 3G VAS to satisfy diversified customer demand and increase usage

• VAS services includes– Information: News, weather, finance,

sports, public transportation timetables

– Service applications: Movie ticketing, Xuite, shopping channel and e-book

– Payment for parking fees, game debit card

– Membership: Personal bill retrieving, online call center, website recommendation

– Promotion: Festival special

Customized VAS


Successful Smartphone Strategies

646812

1456

0

500

1000

1500

Blended 3G Smartphone

6

325422

503568

653

0

100

200

300

400

500

600

700

Sep 09 Dec 09 Mar 10 Jun 10 Sep 10

NT$

Thousand

• Promote smartphones with variety of applications to increase premium customer penetration

– Platforms support iOS (iPhone), Android, Windows Mobile, Symbian and BMP etc.

– Tie-in-sales with world-class smartphones (ex. Apple, HTC and Garmin-Asus)

Mobile Internet SubsMobile Internet Subs

ARPU ARPU (Jan(Jan--Sep 10)Sep 10)

2,535

3,643

2,798

4,129

0500

1,0001,5002,0002,5003,0003,5004,0004,500

2008 2009 3Q 09 3Q 10

Re

ve

nu

e

New Business Initiatives for Future Growth


Corporate ICT Business

Cloud Computing

Convergence Services

• Services launched: Music (hifree,KKBOX), Video (Sports, Movie), Surveillance, Multimedia Phone

• Expecting single sign-on available on 3 platforms in early Dec 2010

Enterprises,Government

PrivateIaaSPaaSSaaS

Cloud

Service Provider

SME & public usersSME & public usersPublicPublic

• To focus on ICT business lines and government project

– ITS, iEN, information security, PBX, call center, billing VAS and IDC

– IOT

NT$ mn


ICT Market

JVJV

• Vietnam (Viettel IDC): Major businesses include Hosting Co-location, Server rental, VAS etc

• China (Sertech): Duplicate our experiences in call center cross strait

SubsidiarySubsidiary

• China and Vietnam : Deploy global plan by local touch

• Provide ICT-related solution with iEN, mobile VAS and ITS services etc., scheduled to be in operation in Q1 2011

Overseas Development


Telecom Market

• Expand international fixed business to provide quality and competitive services to multinational corporate customers

• Major business: IPLC, IP-VPN, IP transit, voice and data wholesale and type I/II services


Effective and Efficient Capital Expenditures

Note: Figures are on consolidated basis.

Capital Expenditure

Cap

ex

(NT

$b

n)

0

5

10

15

20

25

30

35

2007 2008 2009 Q3 09 Q3 10

Others International Fixed CommunicationsInternetMobile Domestic Fixed Communications

CapEx as %of Revenue 12.7% 14.9% 12.8% 12.5% 12.1%

25.1

30.1

25.5

6.3 6.2

• Future investments continue to focus on core businesses and on migrating mobile and data customers to higher revenue platforms– 3G / 3.5G / LTE– IP-based NGN– FTTx– Service Platforms

• The guideline for capex to revenue remains 15%

• Additional investment will be on cloud computing business over next 2~3 years

Financials Overview


Financials: Income Statement Highlights

ROC GAAP (Consolidated)

(NT$bn) Jan-Sep2009Jan-Sep

2010Growth

Rate Q3 2009 Q3 2010Growth

Rate

Net Revenues 147.24 150.13 2.0% 50.06 50.86 1.6%

Operating Costs and Expenses

104.01 105.90 1.8% 35.87 36.42 1.5%

Income from Operations 43.23 44.23 2.3% 14.19 14.44 1.8%

Net Income 33.18 36.94 11.3% 10.92 11.95 9.5%

Net Income Margin (%) 22.53 24.61 21.81 23.50

EBITDA 70.57 69.94 (0.9%) 23.16 22.88 (1.2%)

EBITDA margin (%) 47.93 46.59 46.27 44.98

Note:The calculation of growth rate is based on NT$mn.


Financials: Business Segment RevenuesROC GAAP (Consolidated)


2010Growth

RateQ3 2009 Q3 2010 Growth

Rate

Domestic Fixed 52.95 52.05 (1.7%) 17.71 17.52 (1.1%)

Local 24.62 24.06 (2.3%) 8.27 8.10 (2.1%)

DLD 5.84 5.05 (13.5%) 1.99 1.65 (17.1%)

Broadband Access 14.88 15.17 2.0% 4.97 5.11 3.0%

Mobile 64.61 66.63 3.1% 22.08 22.30 1.0%

Mobile Voice 47.40 46.73 (1.4%) 16.19 15.72 (2.9%)

Mobile VAS 6.18 7.98 29.2% 2.11 2.79 32.3%

Internet VAS 1.47 1.61 9.8% 0.52 0.54 3.4%

Handsets Sales 10.90 11.81 8.3% 3.69 3.77 1.9%

Internet 17.21 18.32 6.4% 5.81 6.40 10.2%

Internet Services 12.95 13.55 4.6% 4.31 4.56 5.7%

International Fixed 11.53 11.70 1.5% 4.09 4.01 (1.9%)

ILD 9.76 9.59 (1.7%) 3.42 3.34 (2.3%)

Others 0.94 1.44 53.3% 0.36 0.62 70.6%

Total 147.24 150.13 2.0% 50.06 50.86 1.6%Note:The calculation of growth rate is based on NT$mn.


Financials: Costs & Expenses



2010Growth


Rate

Operating Costs 82.94 84.08 1.4% 28.67 28.94 0.9%

Operating Expenses 21.07 21.82 3.6% 7.20 7.48 3.8%

Marketing 15.94 16.48 3.4% 5.53 5.73 3.5%

General and Administrative 2.80 2.92 4.4% 0.87 0.89 2.4%

R&D Expense 2.33 2.42 4.3% 0.80 0.86 7.9%

Total 104.01 105.90 1.8% 35.87 36.42 1.5%

Note:The calculation of growth rate is based on NT$mn.


Cash Flow



2010Growth


Rate

Net Cash Flows from Operating Activities 49.47 52.43 6.0% 15.22 19.49 28.1%

CAPEX 16.56 15.50 (6.4%) 6.26 6.18 (1.4%)

Free Cash Flow 32.91 36.93 12.22% 8.96 13.31 48.55%

Cash and Cash Equivalents at the end of period

55.76 67.40 20.9% 55.76 67.40 20.9%

Note:1.The calculation of growth rate is based on NT$mn.2. Free cash flow is subtracting Capex from net cash flows from operating activities.

Q4 2010 Forecast

ROC GAAP (Parent Company Only)

(NT$bn) Q3 2010 Q4 2010E Growth Rate Q4 2009 Q4 2010EGrowth

Rate

Net Revenues 46.83 46.80 (0.1%) 47.44 46.80 (1.3%)

Operating Costs and Expenses

32.80 33.97 3.6% 34.45 33.97 (1.4%)

Net Income Margin (%) 25.52 22.75 22.30

Income from Operations

14.03 12.83 (8.5%) 12.99 12.83 (1.2%)

Net Income 11.95 10.65 (10.9%) 10.58 10.65 0.7%

22.75

EBITDA 22.36 21.16 (5.3%) 21.86 21.16 (3.2%)

EBITDA margin (%) 47.75 45.21 46.07 45.21

Note: These projections are based on a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies.


Management Highlights

Stable Cash Return plus Solid Growth Opportunity

• Strong market leader in stable Taiwan telecom market

• Solid performance driven by steady growth of mobile VAS and broadband services

• Successful and continuing cost efficiency drive

• Sustainable dividend payout with strong balance sheet and prudent capital management

• Proactive pursuit of future growth opportunities, with innovative service offerings and leading edge technology in domestic and overseas markets


Reference

Regulatory Update- F2M call pricing


Payment to Mobile Operators (NT$/Minute) F2M call pricing

Dominant Fixed- line Market player

◎ Mobile Interconnection Fee (NT$2.15) + Transition Fee (NT$1.956~0)

(CHT)◎Transition Fee decreases to zero over the period of 6

years

2011 2012 2013 2014 2015 2016

1.956 1.7304 1.3843 1.0383 0.6922 0.3461

Other Fixed-line Operators

Mobile Interconnection Fee (zero transition fee )

No higher than CHT’s 2G tariff before the reverse

No higher than CHT’s 2G tariff before the reverse

Broadband Network Roadmap

ADSLADSLADSL EPON/GPON EPON/GPON EPON/GPON VDSL/EPONVDSL/EPONVDSL/EPON NG PON/WDM PONNG PON/WDM PONNG PON/WDM PON

2006 2010 20151999

256K~8M 10M~50M 50M~100M 100M~1G

2007 2011 2020

Multiplatform Applications/Services

Pave the way for customerPave the way for customer’’s future demandss future demands

ADSL ： Asymmetric Digital Subscriber Line

VDSL ： Very high bit rate Digital Subscriber Line

EPON ： Ethernet Passive Optical Network

GPON ： Gigabit Passive Optical Network

NG PON ： Next Generation Passive Optical Network

WDM PON ： Wave Division Multiplexing Passive Optical Network


http://en.wikipedia.org/wiki/Asymmetric_Digital_Subscriber_Linehttp://en.wikipedia.org/wiki/Very_high_bitrate_digital_subscriber_linehttp://xuite.net/http://images.google.com.tw/imgres?imgurl=http://icpc.cc.ntu.edu.tw/npsc2001/icons/HiNet-logo.jpg&imgrefurl=http://contest.cc.ntu.edu.tw/npsc2001/&usg=__psh7h7fTwzK_g2KSck2dJeMefzc=&h=360&w=692&sz=24&hl=zh-TW&start=1&um=1&itbs=1&tbnid=flxgobr_4NRF1M:&tbnh=72&tbnw=139&prev=/images%3Fq%3Dhinet%26um%3D1%26hl%3Dzh-TW%26sa%3DN%26tbs%3Disch:1

Mobile Network Roadmap

2G2G 3G 3G 2.5G2.5G Beyond 3GBeyond 3G

2000 2005.07 2006.09 20081994

GSM GPRS WCDMA HSPA LTE

2009

HSPA+HSPA+

2010 2011 2012

Pre-4G Pre-4G

FDDFDD--LTE & TDDLTE & TDD--LTELTE TrialTrial

Q2

3G/Wi-Fi integrated wireless internet service launched in yearend of 09

5000 Wi-Fi spots be built in ‘10

Wherever customers are, we help them surf more easily on the webWherever customers are, we help them surf more easily on the weband gain valueand gain value

• Continues to expand 3.5G HSPA 7.2Mbps & 14 Mbps coverage nationwide

• Offers HSPA+ 21 Mbps at end of 2010

• Leverage our Wi-Fi spots to offload 3G/3.5G data traffic

• Conducts FDD-LTE & TDD-LTE Trial (Max 100M bps) since 2010Q2 for performance evaluation and service test

WCDMA: Wideband Code Division Multiple AccessHSPA: High Speed Packet AccessLTE: Long Term Evolution



Continuing Broadband Network Construction

Fiber Deployment Plan

• FTTx access expected to exceed ADSL access by year 2011

• FTTx coverage expected to reach 85% by year 2014

• Broadband access + ISP revenue slightly growing in upcoming years

• Wireline* VAS revenues expected to have higher growth

Note:

(1) The Coverage rate(>30M) is based on the household number (7.80mn) as of Dec. 2009

(2) Wireline : Fixed + Internet

52004300 4000 3500 3000

1,012 1,8553,576 4,000 4,400

4,7005,000

26201 500

800 1100 1400

4960 48004600

2,791118

85%83%78.2% 81.7%

77%73%

58.3%

29.8%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

90%FTTHFTTN/FTTBADSLCoverage

CoverageThousand

Port

3Q 2010 Operating Results�DisclaimerSolid PerformanceConsistent Return to ShareholdersBusiness OverviewBroadband Services - Growth Drivers in Fixed-LineGrowing Momentum in MOD/ IPTVNumber One Mobile Services ProviderSmartphone - Value Driver for MobileNew Business Initiatives for Future GrowthEffective and Efficient Capital ExpendituresFinancials Overview Financials: Income Statement HighlightsFinancials: Business Segment Revenues�Financials: Costs & Expenses �Cash FlowQ4 2010 ForecastManagement HighlightsStable Cash Return plus Solid Growth Opportunity Q&A�Reference�Regulatory Update- F2M call pricingBroadband Network Roadmap�Mobile Network Roadmap�Continuing Broadband Network Construction

3Q 2010 Operating Results · 2019. 11. 14. · Solid Performance Consolidated Revenue 49.12 48.06...

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Transcript of 3Q 2010 Operating Results · 2019. 11. 14. · Solid Performance Consolidated Revenue 49.12 48.06...