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4G/3G/WiFi

Chunghwa Telecom Reports Q4, Full Year

TAIPEI -- Chunghwa Telecom Co., Ltd. (TAIEX: 2412, NYSE: CHT) ("Chunghwa" or "the Company") today reported its audited operating results for the fourth quarter and full year of 2014. All figures were prepared in accordance with Taiwan-International Financial Reporting Standards ("T-IFRSs") on a consolidated basis.

(Comparisons throughout the press release, unless otherwise stated, are made with regard to the prior year period)

Fourth Quarter 2014 Financial Highlights

  • Total revenue increased by 1.4% to NT$59.63 billion
  • Mobile communications revenue increased by 2.2% to NT$28.90 billion
  • Mobile value-added services (VAS) revenue increased by 21.1% to NT$9.34 billion, with mobile Internet revenue, the largest contributor to VAS revenue, increasing by 26.4%
  • Handset sales revenue increased by 3.2% to NT$8.98 billion
  • Internet revenue increased by 2.8% to NT$6.69 billion
  • Domestic fixed communications revenue increased by 1.6% to NT$19.60 billion
  • International fixed communications revenue decreased by 4.9% to NT$3.75 billion
  • Total operating costs and expenses increased by 6.7% to NT$50.89 billion
  • Net income attributable to stockholders of the parent decreased by 12.6% to NT$8.07 billion
  • Basic earnings per share (EPS) was NT$1.04

    Full Year 2014 Financial Highlights

  • Total revenue decreased by 0.6% to NT$226.61 billion
  • Mobile communications revenue increased by 0.1% to NT$110.67 billion
  • Mobile VAS revenue increased by 22.5% to NT$34.77 billion
  • Handset sales revenue decreased by 2.0% to NT$32.45 billion
  • Internet revenue increased by 2.2% to NT$26.00 billion
  • Internet VAS revenue increased by 10.1% to NT$2.96 billion
  • Domestic fixed communications revenue decreased by 2.0% to NT$72.06 billion
  • International fixed communications revenue decreased by 2.8% to NT$15.31 billion
  • Total operating costs and expenses increased by 1.1% to NT$182.44 billion, but was 1.2% less as compared with our full year guidance
  • Net income attributable to owners of the parent decreased by 2.7% to NT$38.62 billion, but exceeded our full year guidance by 7.8%
  • Basic EPS was NT$4.98

    Dr. Rick L. Tsai, Chairman and CEO of Chunghwa Telecom stated, "We are pleased to report our operating results for 2014. During the fourth quarter, we witnessed a rapid uptake in 4G services throughout Taiwan. As of the end of 2014, we have already taken a market leading position in 4G services, accumulating over 1.33 million 4G subscribers and obtaining 38.6% market share. In December, we introduced LTE-Advanced carrier aggregation (CA) technology for the 900MHz and 1800MHz spectrum bands to provide users higher data rates. Furthermore, our 4G network now covers every township in Taiwan and we aim to continue our build-out of the network so that we can achieve 99% population coverage island-wide by the end of 2015. In addition, our broadband market share remained stable despite intensifying competition from cable operators."

    "Going forward, we aim to continue expanding our 4G subscriber base to achieve our 40% market share target as well as focusing on the development of fixed and mobile value-added services. We will also promote our customized ICT solutions to enterprise customers across various industries. We remain confident that these initiatives will help solidify Chunghwa's position as the leading integrated telecommunications service provider in Taiwan."

    Revenue
    Chunghwa Telecom's total revenues for the fourth quarter of 2014 increased by 1.4% to NT$59.63 billion, which was comprised of 48.5% mobile, 11.2% internet, 32.9% domestic fixed, 6.3% international fixed, and 1.1% from other businesses.

    Mobile communications revenue for the fourth quarter 2014 increased by 2.2% to NT$28.90 billion. This was mainly due to the continual growth of mobile VAS revenue and higher handset sales, but was slightly offset by the decrease in mobile voice revenue, which was mainly due to increased market competition and promotional packages. Internet business revenue for the fourth quarter of 2014 increased by 2.8% year-over-year to NT$6.69 billion. The increase was primarily attributable to higher HiNet and Internet value-added service revenue. Domestic fixed revenue for the fourth quarter of 2014 increased by 1.6% year-over-year to NT$19.60 billion, mainly due to the growth of ICT project revenue and MOD revenue. Local and DLD service revenue decreased by 5.6% and 5.4%, respectively, mainly due to increased mobile and VoIP substitution. Broadband access revenue remained flat year-over-year at NT$4.84 billion.

    International fixed revenue decreased by 4.9% to NT$3.75 billion, mainly due to lower international long distance revenue because of increased market competition.

    Total revenue for the full year of 2014 decreased by 0.6% year-over-year to NT$226.61 billion, and was comprised of 48.8% mobile, 11.5% Internet, 31.8% domestic fixed, 6.8% international fixed, and 1.1% other.

    Operating Costs and Expenses
    Total operating costs and expenses for the fourth quarter of 2014 increased 6.7% to NT$50.89 billion. The increase was primarily due to the higher cost of handsets sold, increasing depreciation and amortization expenses and costs for ICT projects. The increase in depreciation expense was mainly attributable to 4G network construction, 3G network maintenance and purchases of cloud and IDC equipment while the increase in amortization expense was mainly due to the amortization of the 4G license fee.

    Total operating costs and expenses for 2014 increased by 1.1% year-over-year to NT$182.44 billion, mainly due to the increase in depreciation and amortization expenses, with reasons similar to those mentioned for the fourth quarter of 2014. In addition, personnel expenses increased primarily due to the higher early retirement compensation.

    Income Tax
    Income tax expense for the fourth quarter of 2014 decreased by 26.5% to NT$1.46 billion.

    Operating Income and Net Income
    Income from operations for the fourth quarter of 2014 decreased by 16.1% to NT$9.40 billion. The operating margin was 15.8%, compared to 19.1% in the same period of 2013. Net income attributable to stockholders of the parent decreased by 12.6% to NT$8.07 billion. Basic earnings per share was NT$1.04.

    Cash Flow and EBITDA
    Cash flow from operating activities for the fourth quarter of 2014 decreased by 4.5% to NT$28.94 billion. Cash and cash equivalents as of December 31st, 2014 increased to NT$23.56 billion year-over-year. EBITDA for the fourth quarter of 2014 decreased by 6.9% to NT$18.03 billion. EBITDA margin was 30.2% compared to 33.0% in the same period of 2013.

    Capital Expenditure ("Capex")
    Total Capex for the fourth quarter of 2014 decreased by 11.4% to NT$11.59 billion, and was comprised of 47.3% domestic fixed communications, 30.1% mobile communications, 17.5% internet, 3.5% international fixed communications, and 1.6% from others.

    Business and Operational Highlights
    Broadband/HiNet

  • The Company continued to execute its strategy of encouraging FTTx migration. As of December 31st, 2014, the number of FTTx subscribers reached 3.12 million, accounting for 68.7% of the Company's total broadband users. Moreover, the number of subscribers signing up for speeds of 100Mbps or higher increased by 132%, reaching more than 867,000.
  • HiNet broadband subscribers increased 0.2% year-over-year, totaling 3.79 million as of December 31st, 2014. Mobile
  • As of December 31st, 2014, Chunghwa had 11.13 million mobile subscribers, representing a 4.4% year-over-year increase. The Company also had 5.16 million mobile Internet subscribers, representing a 31.0% year-over-year increase.
  • As of December 31st, 2014, the company accumulated over 1.33 million 4G subscribers. Fixed-line
  • As of December 31st, 2014, the Company maintained its leading position in the fixed-line market, with a total of 11.37 million subscribers.

    2015 Guidance
    For 2015, the Company expects total revenue to increase by NT$4.48 billion, or 2.0%, to NT$231.09 billion as compared to the prior year period. Operating costs and expenses are expected to increase by NT$3.48 billion, or 1.9%, to NT$185.92 billion as compared to the prior year period. Income from operations is expected to be NT$45.05 billion. Non-operating income is expected to be NT$0.87 billion. Income before income tax and net income attributable to stockholders of the parent are expected to be NT$45.92 billion and NT$37.50 billion, respectively. Earnings per share are expected to be NT$4.83. CAPEX is expected to decrease by NY$1.86 billion, or 5.7%, to NT$30.7 billion as compared to the prior year period.

    Chunghwa Telecom Co. Ltd. (NYSE: CHT)

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