Thursday, August 25, 2011

Taiwan's Chunghwa Builds the "Digital Rainforest"

Taiwan's Chunghwa Telecom reported Q2 2011 revenue of NT$54.42 billions, up 9.6% year-over-year, of which 41.1% was from the mobile business, 11.5% was from the internet business, 36.3% was from the domestic fixed business, 7.1% was from the international fixed business, and the remainder was from other services. Total operating costs and expenses increased by 12.3% to NT$39.01 billion and net income totaled NT$13.30 billion, representing a 2.8% increase.

Dr. Shyue-Ching Lu, Chairman and Chief Executive Officer of Chunghwa Telecom, said "Our desire to build on this top-line growth and leverage our reputation for innovative offerings and premium customer service led to the launch of our "Digital Rainforest" initiative during the second quarter. This initiative builds on the significant traction we have already gained from our inroads into the digital business ecosystem, and represents a cohesive strategy for integrating and reinvigorating our activities within this space. Key elements of "Digital Rainforest" include a cloud computing initiative called hicloud PaaS, a cutting edge broadband service, integrated service platforms, and domestic and international collaboration on reducing carbon emissions to promote sustainability. We are also implementing our new channel strategy by transforming our service centers to convey our new image as we embrace the cloud computing era. I am confident that this "Digital Rainforest" initiative will provide additional momentum to our growth going forward."

Some highlights for the quarter:

Total revenue for the mobile business amounted to NT$22.35 billion for the second quarter 2011, representing a year-on-year increase of 1.1%, mainly due to growth in mobile VAS revenue and handset sales relating to smartphone promotions, which offset the decline in mobile voice revenue. The decline in mobile voice revenue resulted primarily from the shift in pricing right for fixed to mobile calls from mobile to fixed operators.

Chunghwa's Internet business revenue increased by 3.4% year-over-year to NT$6.25 billion in the second quarter of 2011, mainly attributable to growth in the number of broadband subscribers and the migration of ADSL subscribers to fiber solutions.

For the second quarter of 2011, domestic fixed revenue totaled NT$19.78 billion, representing an increase of 14.1% year-over-year. Local revenues increased by 33.6% year-over-year, mainly due to the shift in pricing right for fixed to mobile calls. The 13.9% decline in Domestic Long Distance ("DLD") revenues was due to mobile and Voice over Internet Protocol ("VOIP") substitution, as well as reflecting the mandated tariff reduction.

Broadband access revenue, including ADSL and Fiber to the x (FTTx), increased by 3% year-over-year to NT$5.14 billion. Although ADSL access revenue decreased as more ADSL subscribers migrated to fiber solutions and because of the mandated tariff reduction, the decrease was fully offset by growth in FTTx access revenue.

International fixed line revenue increased by 3.9% to NT$3.86 billion, primarily due to growth in international long distance service and international leased line revenue.

Other revenue grew by 369.3%, primarily due to the increase in construction revenue from the company's property development subsidiary.

CAPEX for Q2 amounted to NT$5.54 billion, a 7.6% year-over-year increase. Of the NT$5.54 billion CAPEX figure, 57.1% was used for the domestic fixed communications business, 21.0% was for the mobile business, 14.3% was for the Internet business, 5.9% was for the international fixed communications business, and the remainder was for other uses.

As of June 30, FTTx subscribers had reached 2.2 million, accounting for 49.7% of total broadband users. This year, the Company is continuing to execute on its strategy to encourage FTTx migration. On June 22, the Company further reduced its broadband service tariffs, especially for speeds of 20Mbps and 50Mbps to stimulate the momentum of migration and subscription. The initiative has been very well received.
HiNet broadband subscribers totaled 3.63 million at the end of June 2011, a year-over-year rise of 2.2%.

As of June 30, 2011, Chunghwa had 9.86 million mobile subscribers, an increase of 4.4% compared to 9.45 million at the end of June 2010.

As of June 30, 2011, the company had 1.15 million mobile internet subscribers, demonstrating strong growth momentum compared to 809 thousand subscribers as of December 2010. As a result, the Company has set a new year-end mobile internet subscriber target of1.4 million.

Chunghwa Telecom now has 17,000 WiFi APs providing 3G offload. The company expects to have 21,000 APs by year end.

Smartphones now represent 40% of handset sales in Taiwan by CHT, up from 25% last year.

Mobile VAS revenue for the second quarter of 2011 rose 42% year-over-year to NT$3.77 billion, with mobile Internet revenue increasing 87.2% year-over-year, making it the largest contributor to VAS revenue.

As of August 26, 2011, Chunghwa's Multimedia-on-demand (MOD) subscriber number reached over 930,000.