Chunghwa Telecom Reports Operating Results for the Third Quarter of 2010

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• USA - English

TAIPEI, Taiwan, Oct. 27 /PRNewswire-Asia-FirstCall/ -- Chunghwa Telecom Co., Ltd. (TAIEX: 2412; NYSE: CHT) ("Chunghwa" or "the Company"), today reported its operating results for the third quarter and first nine months of 2010. All figures are presented on a consolidated basis and were prepared in accordance with generally accepted accounting principles of the Republic of China ("ROC GAAP").

Dr. Shyue-Ching Lu, Chairman of Chunghwa Telecom, said, "I'm pleased to report a 1.6% year-over-year rise in revenue during the third quarter of 2010, driven by the continuing economic recovery and the success of our marketing initiatives. The solid revenue mix from our core business was boosted by an increase in mobile value-added services, Internet services and broadband access revenues. Our prudent cost management initiatives resulted in stable operating income, with net income growing 9.5% year-over-year due to the tax rate reduction from 25% to 17%. Looking ahead, we expect to be able to report satisfactory performance for the full year 2010, with fourth quarter revenue projected to be NT$46.80 billion."

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

    Financial Highlights for the Third Quarter of 2010:

    -- Total consolidated revenue increased by 1.6% to NT$50.9 billion
    -- Mobile communications business revenue increased by 1.0% to NT$22.3
       billion; mobile value added revenue increased by 32.3% to NT$2.8
       billion
    -- Internet business revenue increased by 10.2% to NT$6.4 billion
    -- Domestic fixed communications business revenue decreased by 1.1% to
       NT$17.5 billion; broadband access revenue increased by 3.0% to NT$5.1
       billion
    -- International fixed communications business revenue decreased by 1.9%
       to NT$4.0 billion
    -- Total operating costs and expenses increased by 1.5% to NT$36.4 billion
    -- Net income totaled NT$12.0 billion, representing an increase of 9.5%
    -- Basic earnings per share (EPS) increased by 9.5% to NT$1.23

    Financial Highlights for the First Nine Months of 2010:

    -- Total consolidated revenue increased by 2.0% to NT$150.1 billion
    -- Mobile communications business revenue increased by 3.1% to NT$66.6
       billion
    -- Internet business revenue increased by 6.4% to NT$18.3 billion
    -- Domestic fixed communications business revenue decreased by 1.7% to
       NT$52.1 billion; broadband access revenue increased by 2.0% to NT$15.2
       billion
    -- International fixed communications business revenue increased by 1.5%
       to NT$11.7billion
    -- Total operating costs and expenses increased by 1.8% to NT$105.9
       billion
    -- Net income totaled NT$36.9 billion, representing an increase of 11.3%
    -- Basic EPS increased by 11.3% to NT$3.81

Revenue

Chunghwa's total consolidated revenue for the third quarter of 2010 increased by 1.6% year-over-year to NT$50.9 billion, of which 34.5% was from its domestic fixed business, 43.8% was from its mobile business, 12.6% was from its Internet business, 7.9% was from its international fixed business and the remainder was from other business segments. The primary reasons for the year-over-year increase were the economic recovery and the Company's marketing initiatives.

Domestic fixed line business revenue totaled NT$17.5 billion, representing a decrease of 1.1% year-over-year. Local revenues decreased by 2.1% year-over-year to NT$8.1billion, mainly due to mobile and Voice over Internet Protocol (VOIP) substitution. The 17.1% decline in domestic long-distance revenues to NT$1.7 billion was also due to mobile and VOIP substitution, and the mandated tariff reduction.

Broadband access revenue, including Asymmetric Digital Subscriber Line ("ADSL") and Fiber to the x ("FTTx"), increased by 3.0% year-over-year to NT$5.1 billion. Although ADSL access revenue decreased as more ADSL subscribers migrated to fiber solutions, the decrease was fully offset by growth in FTTx access revenue. Chunghwa believes that this migration will continue as customers continue to migrate to FTTx services, and that broadband revenue will therefore increase over time.

Mobile revenue increased by 1.0% year-over-year to NT$22.3 billion, mainly due to growth in mobile VAS revenue relating to the Company's smartphone promotion and handset sales.

Internet revenue increased by 10.2% to NT$6.4 billion, mainly attributable to Internet services growth, which was driven by the increase in broadband subscribers and the migration of ADSL subscribers to fiber solutions.

International fixed-line revenue decreased by 1.9% to NT$4.0 billion, mainly due to VOIP substitution and market competition that was partially offset by growth in leased line revenue.

Finally, other revenue increased by 70.6% to NT$0.6 billion in the third quarter of 2010 compared to the same period of 2009, primarily due to the consolidation of subsidiaries.

For the first nine months of 2010, total revenue was NT$150.1 billion, a 2.0% increase from the same period last year, with the domestic fixed business accounting for 34.7%, the mobile business contributing 44.4%, the Internet business 12.2%, the international fixed business 7.8%, and the remainder from others.

Costs and Expenses

Total operating costs and expenses for the third quarter of 2010 were NT$36.4 billion, an increase of 1.5% year-over-year, mainly due to the increased cost of corporate Information and Communications Technology ("ICT") services and corporate solutions, and the performance-based bonus accrual relating to net income growth.

Total operating costs and expenses for the first nine months of 2010 increased 1.8% year-over-year to NT$105.9 billion, due to the increased performance-based bonus accrual and cost of sales.

Income Tax

Income tax expenses for the third quarter of 2010 were NT$2.3 billion, representing a 27% decrease compared to the same period of 2009. This decrease resulted from the government's income tax rate reduction from 25% to 17% this year.

EBITDA/Operating income/Net Income

Operating income for the third quarter of 2010 increased by 1.8% year-over-year to NT$14.4 billion. EBITDA decreased by 1.2% to NT$22.9 billion, primarily as a result of the mandated National Communications Commission ("NCC") tariff reduction and changing cost structure. The Company's EBITDA margin and operating income margin for the third quarter of 2010 were 45.0% and 28.4%, respectively, compared to 46.3% and 28.3%, respectively, for the same period of 2009.

Net income for the third quarter of 2010 increased by 9.5% year-over-year to NT$12.0 billion, primarily due to the revenue growth and lower income tax rate.

For the first nine months of 2010, operating income amounted to NT$44.2 billion, a rise of 2.3% year-over-year. EBITDA decreased by 0.9% to NT$69.9 billion. Net income reached NT$36.9 billion, a 11.3% increase, mainly due to the revenue growth and income tax rate reduction.

Capital Expenditure ("Capex")

Total capex for the third quarter of 2010 amounted to NT$6.2 billion, representing a decrease of 1.4% year-over-year. Of the NT$6.2 billion in capex, 55.4% was spent on the domestic fixed communications business, 27.4% on the mobile communications business, 7.4% on the Internet business, 7.0% on the international fixed communications business and the remainder was used for other purposes.

Cash Flow

Cash flow from operating activities for the third quarter of 2010 was NT$19.5 billion, a 28.1% increase compared to the same period of 2009.

As of September 30, 2010, the Company's cash and cash equivalents had increased 20.9% year-over year to NT$67.4 billion.

    Performance Highlights by Business Line:

    Domestic Fixed/Broadband/HiNet Business
    -- As of the end of September 2010, the Company maintained its leading
       fixed-line market position, with fixed-line subscribers totaling 12.3
       million.
    -- Total broadband subscribers amounted to 4.3 million as of September 30,
       2010, among which 1.96 million were FTTx subscribers, accounting for
       45.1% of the Company's total broadband subscriber base. During the
       third quarter, Chunghwa continued its efforts to migrate ADSL
       subscribers to FTTx solutions.  By the end of the third quarter of 2010,
       the number of ADSL and FTTx subscribers with a service speed greater
       than 8 Mbps reached 2.3 million, representing 52.8% of total broadband
       subscribers, compared to 50.9% at the end of June 2010.
    -- HiNet subscribers totaled 4.1 million at the end of September 2010.
    -- The number of Multimedia-on-Demand ("MOD") subscribers is currently
       over 750 thousand up to now.

    Mobile Business
    -- As of September 30, 2010, Chunghwa had 9.6 million mobile subscribers,
       an increase of 4.3% compared to 9.2 million at the end of September
       2009.
    -- Chunghwa had 5.3 million 3G subscribers at the end of September 2010,
       accounting for 54.9% of its total subscriber base.
    -- Mobile VAS revenue for the first nine months of 2010 increased 29.2%
       year-over-year to NT$8.0 billion; Short Message Service revenue rose
       7.4% year-over-year and mobile Internet revenue increased 80%
       year-over-year.
    -- Smartphone subscriptions accounted for 23% of total handsets offered by
       the Company during the first nine months of 2010. Smartphone Average
       Revenue per User ("ARPU") was 125% higher than blended ARPU for the
       same period.

Financial Statements

Financial statements and additional operational data can be found on the Company's website at http://www.cht.com.tw/ir/filedownload .

Note Concerning Forward-looking Statements

Except for statements in respect of historical matters, the statements made in this press release contain "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual performance, financial condition or results of operations of Chunghwa to be materially different from what may be implied by such forward-looking statements. Investors are cautioned that actual events and results could differ materially from those statements as a result of a number of factors including, among other things: extensive regulation of the telecom industry; the intensely competitive telecom industry; Chunghwa's relationship with its labor union; general economic and political conditions, including those relating 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 Severe Acute Respiratory Syndrome; and those risks identified in the section entitled "Risk Factors" in Chunghwa's annual reports on Form F-20 filed with the SEC.

The forward-looking statements in this press release reflect the current belief of Chunghwa as of the date of this press release. The Company undertakes no obligation to update these forward-looking statements for events or circumstances that occur subsequent to the date of this press release.

About Chunghwa Telecom

Chunghwa Telecom (TAIEX 2412, NYSE: CHT) is Taiwan's leading telecom service provider. It provides fixed-line, mobile and Internet services to residential and business customers in Taiwan.

    Contact:

     Fu-fu Shen
     Phone: +886-2-2344-5488
     Email: [email protected]

SOURCE Chunghwa Telecom Co., Ltd.