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Chunghwa Telecom Reports Operating Results for the First Half of 2009

Chunghwa Telecom
2009-08-27 16:48 1000

TAIPEI, Taiwan, Aug. 27 /PRNewswire-Asia/ -- Chunghwa Telecom Co., Ltd (TAIEX: 2412; NYSE: CHT) ("Chunghwa" or "the Company"), today reported its operating results for the first six months of 2009. All figures were presented on a consolidated basis and prepared in accordance to generally accepted accounting principles in the Republic of China ("ROC GAAP").

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

Financial Highlights for 1H09:

-- Total consolidated revenue decreased by 3.7% to NT$97.2 billion

-- Internet and data revenue decreased by 0.2% to NT$24.7 billion

-- Mobile revenue decreased by 2.9% to NT$35.2 billion; mobile VAS revenue

increased by 18.5% to NT$4.1 billion

-- Net income totaled NT$22.3 billion, representing a decrease of 4.2%

-- Basic earnings per share (EPS) decreased by 4.1% to NT$2.09

Financial Highlights for 2Q09:

-- Total consolidated revenue decreased by 3.8% to NT$48.1 billion

-- Internet and data revenue remained flat at NT$12.3 billion;

ADSL & FTTx revenue increased by 0.4% to NT$4.9 billion;

Managed data services and other revenues increased by 11.1% to NT$1.2

billion

-- Mobile revenue decreased by 2.6% to NT$17.7 billion; mobile VAS revenue

increased by 18.5% to NT$2.0 billion

-- Net income totaled NT$11.5 billion, representing a decrease of 8.3%

-- Basic earnings per share (EPS) decreased by 8.3% to NT$1.08

Revenues

Chunghwa's total consolidated revenues for the first half of 2009 decreased by 3.7% year-over-year to NT$97.2 billion, of which 27.3% was from fixed-line services, 36.3%was from mobile services, 25.4% was from Internet and data services, and the remainder was mainly from handset sales from Chunghwa's subsidiary SENAO on a consolidated basis. The primary reason for the total revenue decline was due to the deteriorating economic environment and market competition, which resulted in the reduced traffic for fixed line and mobile businesses.

For the mobile business, total revenue for the first half of 2009 amounted to NT$35.2 billion, representing a decline of 2.9% year-over-year. For the first half of 2009, Chunghwa achieved some progress via increased subscriber numbers of 3.0% and enhanced VAS service revenues of 18.5% compared to the first half of 2008. However, these successes were offset by the economic downturn and the market competition Chunghwa's internet and data revenue decreased slightly by 0.2% year-over-year to NT$24.7 billion in the first half of 2009, mainly due to the tariff reduction for HiNet and ADSL services. As of the end of first half of 2009, Chunghwa provides FTTx to about 1,342 thousand of subscribers, compared to 782 thousand as of the end of first half of 2008.

In the first half of 2009, fixed-line revenue totaled NT$26.5 billion, decreasing 7.7% year-over-year. The local and domestic long distance revenues decreased by 5.7% to NT$16.3 billion and by 10.5% to NT$3.8 billion

year-over-year, respectively, for the first half of 2009. These decreases were mainly due to the economic downturn, as well as mobile and VOIP substitution. Similarly, international long distance revenue decreased by 10.7% year-over-year to NT$6.3 billion, as a result of the overall economic downturn, VOIP substitution and market competition.

Finally, other revenue decreased by 4.0% to NT$10.7 billion in the first half of 2009 compared to same period last year, mainly due to the decrease of handset sales.

For the second quarter of 2009, total revenue was NT$48.1 billion, a 3.8% decrease from the same period last year. Of this, 27.9% was from fixed-line services, 36.8% was from mobile services and 25.5% was from Internet and data services, with the remainder primarily attributed to the consolidation of NT$2.6 billion in revenue from SENAO.

Costs and expenses

Total operating costs and expenses for first half 2009 were NT$68.1 billion, a decrease of 0.7% compared to the first half 2008. For the second quarter of 2009, total operating costs and expenses were NT$33.1 billion, a decrease of 2.9% compared to the second quarter of 2008. Both decreases of costs and expenses in the first half and the second quarter of 2009 were mainly due to the decline of Senao's operating costs primarily resulted from Senao's revenue decline, as well as the decrease in the parent company's depreciation expense. However, the operating expenses in first half 2009 were NT$13.9 billion, an increase of 3.3% compared the same period 2008. The increase was mainly due to additional ERP compensation and increased G&A expenses resulted from the establishment of subsidiaries in Singapore and Japan, etc. which commenced in the second half of 2008.

Income Tax

Income taxes for the first half of 2009 were NT$6.8 billion, representing a decrease of 2.1% compared to NT$7.0 billion for the first half of 2008. This was mainly due to the decrease of revenue resulting in an increase of effective tax rate.

EBITDA and Net Income

Both EBITDA and the operating profit for the first half of 2009 decreased by 8.0% to NT$47.4 billion and by 10.0% to NT$29.0 billion, respectively, primarily due to the revenue decrease. However, net income decreased only by 4.2% mainly because of a NT$2.7 billion valuation loss recognized in the first half of 2008 from the 10-year foreign currency derivative contract. EBITDA margin and the operating margin for the first half of 2009 were 48.8% and 29.9%, respectively, relatively stable compared to 51.0% for EBITDA margin and 32.0% for the operating margin in the first half of 2008.

Similarly, both EBITDA and the operating profit for second quarter of 2009 decreased by 5.2% to NT$24.1 billion and by 5.9% to NT$14.9 billion, respectively. The reasons for these declines are due to the overall revenue decrease. However, both EBITDA and operating profit margins for the second quarter of 2009 are relatively stable at 50.1% and 31.1%, respectively, compared to the second quarter of 2008. Net income decreased by 8.3% to NT$11.5 billion for the second quarter of 2009, at a relatively higher decline rate than the operating profit for the same period, mainly due to the reduced interest income generated from the lower interest rate.

Capital Expenditure ("Capex")

The total capex for the first half of 2009 amounted to NT$10.3 billion, a 9.0% decrease compared to that of the same period in 2008. Of this capex figure, 73.2% was for wireline equipment (including fixed-line and Internet and data), 21.3% was for wireless equipment and the remainder was for other expenditures.

Cash Flow

Cash flow from operating activities for the first half of 2009 decreased by 21.0% to NT$34.3 billion compared to the first half of 2008, primarily due to the revenue decline, as well as due to the NT3.2 billion income tax refund received by the parent company in the first half of 2008.

As of June 30, 2009, the Company's cash and cash equivalents totaled NT$83.4 billion, a decrease of 12.5% year-over-year compared to the same period last year, and the decrease was because of the cash payment from previously completed capital reduction program.

Businesses Performance Highlights:

Internet and Data Services

-- Total HiNet subscribers decreased to 4.07 million as of June 30, 2009.

ADSL subscribers decreased by 156 thousand to 2.96 million quarter-

over-quarter. This decline was offset by strong growth in FTTx

subscriptions, with 148 thousand net additions to around 1.34 million

over the course of the second quarter of 2009, compared to 782 thousand

FTTx subscribers as of June 30, 2008. By the end of June 2009, the

number of ADSL and FTTx subscriptions with a service speed of greater

than 8 Mbps reached 1.78 million, representing 41.4% of total broadband

subscribers, which was 32.1% as the end of June 2008

-- Overall, the Company had 4.3 million broadband subscribers (including

ADSL and FTTx subscribers) at the end of June 2009, a 0.1% decrease in

the number of total broadband subscriptions compared to the same period

of last year.

-- Internet and data revenue decreased by 0.2% year-over-year to NT$24.7

billion in the first half of 2009, mainly due to tariff reduction for

HiNet and ADSL services.

Mobile Services

-- As of June 30, 2009, Chunghwa had 9.04 million mobile subscribers,

slightly up quarter-over-quarter by 0.7% compared to 8.98million as of

March 31, 2009.

-- Chunghwa remained the leading mobile operator in Taiwan. According to

statistics published by the NCC, at the end of June 2009, the Company's

total subscriber market share (including 2G, 3G and PHS) was 34.5%,

while its revenue share was 33.1%.

-- Chunghwa had 251 thousand net additions to its 3G subscriber base

during the second quarter of 2009, recording a 6.5% rise quarter-over-

quarter in the total number of 3G subscribers to 4.1 million as of June

30, 2009.

-- Mobile VAS revenue for the first half of 2009 was NT$4.07 billion, a

18.5% year-over-year increase, with SMS revenue up 13.4% and mobile

Internet revenue up 47.6% for the same period.

Fixed-line Services

-- At the end of June 2009, the Company maintained its leading fixed-line

market position, with fixed-line subscribers totaling 12.58 million.

Early Retirement Program

-- We started to offer an early-retirement program in second half of 2009.

There were 240 employees participated in the program. Despite the ERP

compensation of NT$300 million to be recognized in June, we will

benefit from the cost savings for the rest of the year in 2009.

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 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 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 and we undertake no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such date.

About Chunghwa Telecom

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

Contact:

Fu-fu Shen

Tel: +886-2-2344-5488

Email: chtir@cht.com.tw

Source: Chunghwa Telecom
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