Slide 1: Q3 2012 Operating Results
Q3 2012 Operating Results October 26, 2012 TSE: 2412 NYSE: CHT
Slide 2: Disclaimer
Disclaimer STATEMENT REGARDING UNAUDITED FINANCIAL INFORMATION The unaudited financial information under ROC GAAP in this presentation is preliminary and subject to adjustments and modifications. The audited financial statements and related notes with reconciliation to U.S. GAAP will be included in
Slide 3: Recent Events
Recent Events
Slide 4: Fiber and MOD Services Highly Recognized
Fiber and MOD Services Highly Recognized Broadband Service MOD Service The “Broadband demand survey” The“Digital Convergence Investigation” – Surveys internet users behavior and their survey demand of broadband services – The general public was invited to rate the quality of their cable television s
Slide 5: Business Overview
Business Overview
Slide 6: Smartphone – Value Driver for Mobile
Smartphone – Value Driver for Mobile Highest Subs & Lowest Churn Strategy Thousand 12,000 2.5% Continuing mobile leadership by maintaining largest customer base and lowest churn rate 10,000 Subscribers 2.0% Upgrading retail stores by: Churn 8,000 1.5% – Focusing on high traffic locations 6,000 1.0%
Slide 7: Growing Mobile Value-added Services
Growing Mobile Value-added Services VAS Performance Strategy NT$ mn Increasing mobile VAS revenue by: 28.9% Mobile VAS Revenue % 27.9% 6,000 25.8% 30% 21.6% 22.7% – Offering promotion programs focusing on VAS revenue 341 453 328 1,325 4,000 338 1,333 20% 353 1,229 1,230 1,255 additional data plan ad
Slide 8: Fixed Broadband and Internet Services
Fixed Broadband and Internet Services Performance Strategy Migrating customers to higher speed services Broadband Access Revenue Expanding fiber broadband customer base NT$ mn ARPU NT$ Increasing fiber network coverage, promoting 742 741 702 700 704 800 high-speed internet 5,000 3,305 3,414 3,476 3,
Slide 9: Growing Momentum in MOD/ IPTV
Growing Momentum in MOD/ IPTV Subscriber & Usage Strategy Subscriber market share (CATV+IPTV) YoY grows Enriching content offerings for customers from 13.6% to 18.4% in Q2 2012 78.1% of IPTV subscribers sign up additional Packages Introducing new platform to facilitate digital – Package subscription
Slide 10: ICT and Cloud Computing Initiatives
ICT and Cloud Computing Initiatives ICT Business Strategy Cloud Computing Strategy Expand business scope and focus to include: Strengthen cloud computing infrastructure - ITS, iEN, information security, IMO, call center, IDC, Provide hicloud CaaS, SaaS CRM, hicloud Cloud Computing, ICT for developer
Slide 11: Regulatory Update
ChunghwaTelecom Regulatory Update
Slide 12: Regulatory Update
Regulatory Update • Executive Yuan returned the draft to NCC for reconsideration in Oct. 2012 Telecom Act Amendment • CHT expects the amendment to focus more on the facilitation of digital convergence capabilities for the overall all industry • NCC announced the draft of amendment of “Regulation Gov
Slide 13: Financials Overview
Financials Overview
Slide 14: Financials: Income Statement Highlights
Financials: Income Statement Highlights ROC GAAP (Consolidated) Jan-Sep Jan-Sep Growth Growth (NT$bn) 2011 2012 Rate Q3 2011 Q3 2012 Rate Net Revenues 162.61 164.01 0.9% 55.71 54.40 (2.3%) Operating Costs and 119.37 126.14 5.7% 41.83 42.30 1.1% Expenses Income from 43.24 37.87 (12.4%) 13.88 12.10 (1
Slide 15: Financials: Business Segment Revenues
Financials: Business Segment Revenues ROC GAAP (Consolidated) Jan-Sep Jan-Sep Growth Growth (NT$bn) 2011 2012 Rate Q3 2011 Q3 2012 Rate Domestic Fixed 59.50 56.38 (5.2%) 20.52 18.94 (7.7%) Local 31.33 30.53 (2.6%) 10.74 10.29 (4.2%) DLD 4.40 2.87 (34.8%) 1.46 0.94 (35.9%) Broadband Access 15.37 14.3
Slide 16: Financials: Costs & Expenses
Financials: Costs & Expenses ROC GAAP (Consolidated) Jan-Sep Jan-Sep Growth Growth (NT$bn) 2011 2012 Rate Q3 2011 Q3 2012 Rate Operating Costs 96.76 104.38 7.9% 34.17 34.28 0.3% Operating Expenses 22.61 21.76 (3.8%) 7.66 8.02 4.7% Marketing 16.85 16.05 (4.7%) 5.82 6.12 5.1% General and Administrativ
Slide 17: Cash Flow & EBITDA Margin
Cash Flow & EBITDA Margin ROC GAAP (Consolidated) Jan-Sep Jan-Sep (NT$bn) 2011 2012 Growth Rate Q3 2011 Q3 2012 Growth Rate Net Cash Flow from 45.05 43.08 (4.4%) 19.05 15.77 (17.2%) Operating Activities CAPEX 16.58 22.56 36.0% 6.66 8.33 25.0% Free Cash Flow 28.47 20.52 (27.9%) 12.39 7.44 (39.9%) Cas
Slide 18: Forecast & Operating Results
Forecast & Operating Results ROC GAAP (Parent Company Only) Jan-Sep Achieving Achieving (NT$bn) 2012 2012 (E) Rate Q3 2012 Q3 2012 (E) Rate Net Revenues 141.60 188.88 75.0% 47.24 47.96 98.5% Operating Costs and 105.91 143.75 73.7% 35.71 36.06 99.0% Expenses Income from 35.69 45.13 79.1% 11.53 11.90
Slide 19: Effective and Efficient Capital Expenditure
Effective and Efficient Capital Expenditure Capital Expenditure Moderately increase mid-term capital NT$ bn expenditure 40 17.3% 20% – Focus on Fixed and Mobile broadband 13.8% 12.2% 12.3% 35 33.1 10.2% Budgeted capex for 2012: NT$33.1 bn Capex as % of Revenue 0.8 10% 1.6 30 26.9 4.5 25 24.6 1.4 0.7
Slide 20: Q&A
Q&A
Slide 21: Reference
Reference
Slide 22: Regulatory Development
Regulatory Development • Wireline and wireless tariff reduction starting from April 1, 2010 over 3 years (Please refer Tariff to reference page 23) Regulation • NCC is drafting the next round of tariff reduction plan Single-tariff • In January 2011, Legislative Yuan resolved that NCC and CHT to prop
Slide 23: Tariff Regulations
Tariff Regulations Years Business X factor Target Applicable services in Formula: △CPI -X Operation effect 1 IP Peering 1. The three year tariff Domestic wholesale SMP 2 reduction plan is leased line (Significant Fixed- applicable from Apr 1, 3 ADSL circuit 4.816% 3 2010 to Mar 31, 2013 Market line
Slide 24: High-quality Mobile Network Build-out
High-quality Mobile Network Build-out Heterogeneous network to enhance efficiency – 21M HSPA+ base stations to increase to 5,000 by 2012 – WiFi – Femtocell Mobile data usage expect to increase 65% Base station access bandwidth expect to expand 70% Mobile backhaul bandwidth expect to expand 73% 2012
Slide 25: Continuing Broadband Network Construction
Continuing Broadband Network Construction Fiber Deployment Plan FTTx coverage (>=100M) reach 97% by 2016 Increase FTTH construction in order to meet the demand of high speed broadband 1Gbps trial services has reached over 1,000 households – Chunghwa is one of the leading operators that provides 1Gbp