Slide 1: Q2 2012 Operating Results
Q2 2012 Operating Results August 30, 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: Chunghwa Telecom Overview
Chunghwa Telecom Overview Revenue Breakdown Dominant Market Position (a) Q2 2012 Revenue Breakdown Domestic Fixed (Consolidated) – #1 Local • 95.1% share by subs (11.9 mn subs) • 87.3% share by minutes – #1 DLD • 75.4% share by minutes – #1 Broadband access • 79.7% share by subs (b)(c) (4.55 mn subs
Slide 4: Business Overview
Business Overview
Slide 5: Smartphone – Value Driver for Mobile
Smartphone – Value Driver for Mobile Highest Subs & Lowest Churn Strategy Thousand Continuing mobile leadership by maintaining 12,000 2.5% largest customer base and lowest churn rate 10,000 Upgrading retail stores by: Subscribers 2.0% Churn 8,000 1.5% – Focusing on high traffic locations 6,000 1.0%
Slide 6: Growing Mobile Value-added Services
Growing Mobile Value-added Services VAS Performance Strategy Increasing mobile VAS revenue by: NT$ mn 27.9% 25.8% 30% – Offering promotion programs focusing on Mobile VAS Revenue % 6,000 21.7% 21.6% 22.7% additional data plan adoption with favorable VAS revenue 341 20% 4,000 353 338 328 1,333 voice
Slide 7: Fixed Broadband and Internet Services
Fixed Broadband and Internet Services Performance Strategy Continuing migrating customers to higher speed services Broadband Access Revenue NT$ mn 780 742 741 ARPU NT$ Expanding fiber broadband customer base 702 700 800 Increasing fiber network coverage, promoting 5,000 3,365 3,305 3,414 3,476 3,611
Slide 8: 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 77.7% of IPTV subscribers sign up additional Packages Introducing new platform to facilitate digital – Package subscription
Slide 9: 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, Develop innovative cloud applications for retail Cloud Computing, ICT for
Slide 10: Regulatory Update
ChunghwaTelecom Regulatory Update
Slide 11: Regulatory Update
Regulatory Update • NCC submitted the proposal for amendment to Telecom Act to Executive Yuan on July 30, 2012 • Major issues regarding competent authority capability to impose to dominant players including: Telecom Act • Order to adopt business functional separation when necessary Amendment • Set s
Slide 12: Financials Overview
Financials Overview
Slide 13: Financials: Income Statement Highlights
Financials: Income Statement Highlights ROC GAAP (Consolidated) Growth Growth (NT$bn) 1H 2011 1H 2012 Rate Q2 2011 Q2 2012 Rate Net Revenues 106.90 109.61 2.5% 54.42 54.19 (0.4%) Operating Costs and 77.54 83.83 8.1% 39.01 39.75 1.9% Expenses Income from 29.36 25.78 (12.2%) 15.41 14.44 (6.3%) Operati
Slide 14: Financials: Business Segment Revenues
Financials: Business Segment Revenues ROC GAAP (Consolidated) Growth Growth (NT$bn) 1H 2011 1H 2012 Rate Q2 2011 Q2 2012 Rate Domestic Fixed 38.98 37.44 (4.0%) 19.78 18.44 (6.8%) Local 20.59 20.24 (1.7%) 10.77 10.23 (5.0%) DLD 2.94 1.93 (34.3%) 1.46 0.93 (36.4%) Broadband Access 10.36 9.52 (8.1%) 5.
Slide 15: Financials: Costs & Expenses
Financials: Costs & Expenses ROC GAAP (Consolidated) Growth Growth (NT$bn) 1H 2011 1H 2012 Rate Q2 2011 Q2 2012 Rate Operating Costs 62.60 70.09 12.0% 31.35 33.47 6.8% Operating Expenses 14.94 13.74 (8.1%) 7.66 6.28 (18.1%) Marketing 11.02 9.93 (10.0%) 5.56 4.33 (22.2%) General and Administrative 2.
Slide 16: Cash Flow
Cash Flow ROC GAAP (Consolidated) (NT$bn) 1H 2011 1H 2012 Growth Rate Q2 2011 Q2 2012 Growth Rate Net Cash Flow from 26.00 27.31 5.0% 16.28 14.19 (12.8%) Operating Activities CAPEX 9.92 14.23 43.4% 5.54 7.54 36.0% Free Cash Flow 16.08 13.08 (18.6%) 10.74 6.65 (38.0%) Cash and Cash Equivalent at the
Slide 17: Forecast & Operating Results
Forecast & Operating Results ROC GAAP (Parent Company Only) Achieving Achieving (NT$bn) H1 2012 2012 (E) Rate Q2 2012 Q2 2012 (E) Rate Net Revenues 94.36 188.88 50.0% 46.62 46.91 99.4% Operating Costs and 70.19 143.75 48.8% 32.92 35.75 92.1% Expenses Income from 24.17 45.13 53.6% 13.70 11.16 122.8%
Slide 18: Effective and Efficient Capital Expenditure
Effective and Efficient Capital Expenditure Capital Expenditure Moderately increase mid-term capital expenditure NT$40bn 17.3% 20% – Focus on Fixed and Mobile broadband 12.2% 12.3% 13.0% 35 33.1 9.3% 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 0.7 1.5 Co
Slide 19: Q&A
Q&A
Slide 20: Reference
Reference
Slide 21: Regulatory Development
Regulatory Development Tariff • Wireline and wireless tariff reduction starting from April 1, 2010 over 3 years (Please refer Regulation to reference page 22) Single-tariff • In January 2011, Legislative Yuan resolved that NCC and CHT to propose a single tariff for for Fixed- line Calls island-wide
Slide 22: 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 23: 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 24: 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