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Chunghwa boosts earnings while 5G cost weigh on Taiwan Mobile

Taiwan heavyweights Chunghwa Telecom and Taiwan Mobile have handed down contrasting Q1 results.

Chunghwa, the 35% government-owned market leader, beat its guidance in earnings, operating profit and revenue as it took advantage of 5G demand and the emerging economic recovery.

It reported 6.4% higher net income of NT$8.8 billion (US$315.5 million) on a 4.1% gain in revenue at NT$50.1 billion ($1.8 billion).

Tale of two telcos: Taiwan's biggest operators have fared very differently during the past quarter.  (Source: Vernon Raineil Cenzon on Unsplash)
Tale of two telcos: Taiwan's biggest operators have fared very differently during the past quarter.
(Source: Vernon Raineil Cenzon on Unsplash)

"Given the significant progress in 5G adoption and development, we remain optimistic and expect year-over-year growth of our mobile service revenue for the remainder of this year," said chairman and CEO Chi-Mau Sheih.

Taiwan Mobile, the number two operator, attributed the decline in earnings and operating profit to its heavy 5G capex.

It posted a profit of NT$2.8 billion ($100 million), down 15%, with operating income and EBITDA 15% and 3% lower respectively.

It said that the 5G rollout had peaked, and with capex expected to halve this financial year its free cash flow should improve.

But the main difference between the two isn't just short-term financial performance.

Accumulate to speculate

While Chunghwa is a pureplay telco, Taiwan Mobile is following in the footsteps of neighboring operators in Korea and Japan in building out a thriving digital business.

The 11% rise in revenue was propelled primarily by e-commerce platform Momo, which has been its biggest growth driver for the past two years.

Momo grew 22% year-on-year and improved its EBITDA margin by 1.1 points to 5.2%. With sales of NT$18.4 billion ($657 million) it accounted for more than half of the total NT$35.3 billion ($1.3 billion) in revenue.


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Momo's contribution offset the anemic performance of the core mobile business, which contracted 2%, with both postpaid and blended ARPU also declining by 3%. The CATV unit grew just 1% despite a healthy 12% boost from broadband.

But the company said it was gaining traction in 5G, where it has racked up 600,000 customers, comprising 11% of the postpaid customer base.

In a statement, Taiwan Mobile said it was "currently growing at full speed and expects to further accelerate as our three main growth engines, 5G, Momo and broadband, continue to gain traction. As a result, we are on track to reach our 2021 guidance for consolidated EBITDA."

Chunghwa also experienced a decline in mobile service revenue, which it attributed to the pandemic and switch to VoIP, but said its total mobile business had grown 4% thanks to device sales.

It did not disclose its 5G subscriber numbers, but it said it had captured 39% of total mobile revenue and 36% of subscribers.

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— Robert Clark, contributing editor, special to Light Reading

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