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Taiwan operators post mixed results as they brace for 5G disruption

Taiwan's telcos are feeling some of the pain of the coronavirus, but the impending arrival of 5G could be a bigger disruption.

Market leader Chunghwa Telecom posted a modest Q1 result Thursday, with earnings off 0.4% to NT$8.3 billion (US$280 million) and total revenue 6.2% lower at NT$48.2 billion ($1.61 billion).

President and CFO Harrison Kuo said the pandemic had slowed down overall economic activity and cut Chunghwa's enterprise and international roaming revenue.

Mobile revenue was down 7.9% to NT$22.5 billion ($754 million), which he attributed to the fall in handset sales from COVID-19 and higher market competition, including OTT providers.

Rival Taiwan Mobile also reported a 6% revenue fall in its core mobile business, much of it due to the loss of prepaid businesses from the decline in China visitors.

But it also enjoyed a revenue bounce from the pandemic, with total sales up 7% to NT$21.9 billion ($734 million) thanks to its booming online retail business Momo. Net income was up 8% year-on-year to NT$3.3 billion ($110.5 million).

The positive result from diversification into broadband and e-commerce means the company is "better poised for the extended stress on the economy caused by COVID-19," it said.

Taiwan Mobile president Jamie Lin told analysts the operator was well prepared for the start of 5G through its early-bird signings, which had already helped push up ARPU.

But even so it looks to be vulnerable in 5G to its major competitors, Chunghwa and FarEasTone.

The "big three" telcos spent a total of NT$122 billion ($4.1 billion) in a bruising spectrum auction in February.

But while Chunghwa and FarEasTone acquired 90MHz and 80MHz of prime 3.5GHz spectrum, Taiwan Mobile procured just 60MHz.

Taiwan Mobile's Lin and FarEasTone President Chee Ching had a sharp exchange of views over this in March, with Ching arguing that a large swathe of spectrum was essential to perform 5G enterprise services like network slicing.

Lin responded that bandwidth or network performance wasn't the number one issue for customers – otherwise everyone would choose Chunghwa. He also noted that Taiwan Mobile's 5G spectrum bill is a third lower than FarEasTone's and is carrying very little extra debt.

Both operators are also believed to be considering cooperation with the two smaller players who have limited spectrum and need a partner: Asia-Pacific Telecom (APT) in the case of FarEasTone and Taiwan Star in the case of Taiwan Mobile.

The three major telcos all say they will start 5G service in Q3. They must first receive National Communications Commission (NCC) approval for their business and network security plans.

Chunghwa Telecom and FarEasTone have already completed their approvals.

Taiwan Mobile has won the regulator's blessing for its business plan but is still waiting for approval of its information security plan. Both Taiwan Star and APT are yet to receive approval.

— Robert Clark, contributing editor, special to Light Reading

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