Chunghwa Telecom Reports Operating Results for the First Nine Months and Third Quarter of 2009

TAIPEI, Taiwan, Oct. 30 /PRNewswire-Asia-FirstCall/ -- Chunghwa Telecom Co., Ltd. (TAIEX: 2412, NYSE: CHT) ("Chunghwa" or "the Company"), today reported its operating results for the first nine months and third quarter of 2009. All figures were presented on a consolidated basis and prepared in accordance with generally accepted accounting principles in the Republic of China ("ROC GAAP").

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

    Financial Highlights for the First Nine Months of 2009:
    -- Total consolidated revenue decreased by 3.0% to NT$147.2 billion
    -- Mobile communications business revenue decreased by 3.9% to NT$64.6
       billion; mobile value-added services (VAS) revenue increased by 18.8%
       to NT$6.2 billion
    -- Internet business revenue increased by 0.4% to NT$17.2 billion;
       internet value-added services (VAS) revenue increased by 17.5% to
       NT$1.5 billion
    -- Domestic fixed communications business revenue decreased by 2.8% to
       NT$52.9 billion
    -- International fixed communications business revenue decreased by 3.8%
       to NT$11.5 billion
    -- Total operating costs and expenses decreased by 0.9% to NT$104.0
       billion
    -- Net income totaled NT$33.2 billion, representing a decrease of 9.2%
    -- Basic earnings per share (EPS) decreased by 9.3% to NT$3.42

    Financial Highlights for the Third Quarter of 2009:
    -- Total consolidated revenue decreased by 1.7% to NT$50.1 billion
    -- Mobile communications business revenue decreased by 2.5% to NT$22.1
       billion
    -- Internet business revenue decreased by 0.1% to NT$5.8 billion
    -- Domestic fixed communications business revenue decreased by 2.6% to
       NT$17.7 billion
    -- International fixed communications business revenue increased by 4.0%
       to NT$4.1 billion
    -- Total operating costs and expenses decreased by 1.3% to NT$35.9 billion
    -- Net income totaled NT$10.9 billion, representing a decrease of 17.9%
    -- Basic earnings per share (EPS) decreased by 17.9% to NT$1.13

Dr. Shyue-Ching Lu, Chairman and Chief Executive Officer of Chunghwa Telecom said, "In 2009, and particularly in the third quarter of 2009, we have maintained or increased the subscriber figures in each of our core businesses, including the highly competitive broadband and mobile businesses, despite the challenges presented by the economic environment and market competition. As a result, we have sustained our overall market leadership position in each of our core service areas, and continue to enhance our value-added services, MOD/IPTV offering and key enterprise solutions. Moving forward, we plan to accelerate our fiber deployment and further enrich our MOD/IPTV content in order to continue our growth momentum.

"Beginning in the third quarter of 2009, we are presenting our financial reporting in five operating segments rather than the previous seven segments. We have carefully considered this redefinition and believe that this revised financial reporting framework will better facilitate our ability to assess the performance of each operating segment. This change brings our reporting more in line with global industry standards, and we believe that it will better align our internal reporting metrics and enhance the transparency of our communications."

Revenue

Chunghwa's total consolidated revenue for the first nine months of 2009 decreased by 3.0% year-over-year to NT$147.2 billion, of which 43.9% was from the mobile business, 11.7% was from the internet business, 36.0% was from the domestic fixed business, 7.8% was from the international fixed business and the remainder was from the non-telecom business. The primary reasons for the revenue decline were the economic downturn and market competition, which resulted in reduced traffic in the domestic and the international fixed line business.

For the mobile business, total revenue for the first nine months of 2009 amounted to NT$64.6 billion, representing a decline of 3.9% year-over-year. This decline was mainly due to a decrease in handset and data card sales from Senao. However, Chunghwa made progress by increasing its mobile subscriber numbers by 3.5% and enhancing its value-added-service ("VAS") revenue by 18.8% compared to the same period in 2008.

Chunghwa's internet business revenue increased slightly by 0.4% year-over- year to NT$17.2 billion in the first nine months of 2009. The impact of successful promotion of VAS, such as on-line music and games and internet pornography gatekeeper, was offset by the HiNet tariff reduction implementation, which began in November 2008.

For the first nine months of 2009, domestic fixed revenue totaled NT$52.9 billion, representing a decrease of 2.8% year-over-year. Local and domestic long distance revenues decreased by 5.5% and 9.3%, respectively, year-over- year. These decreases were mainly due to the economic downturn, as well as mobile and VOIP substitution. Broadband revenue, including ADSL and FTTx, slightly decreased by 0.5% to NT$14.9 billion. This decrease was mainly attributable to cable competition and ADSL tariff reduction.

International fixed revenue decreased by 3.8%, primarily because of international leased line revenue growth, the impact of which was partially offset by the decrease in international long distance revenue.

Finally, other non-telecom service revenue decreased by 7.1% to NT$0.9 billion in the first nine months of 2009 compared to same period last year.

For the third quarter of 2009, total revenue was NT$50.1 billion, a 1.7% decrease from the same period last year. Of this amount, the mobile business contributed 44.1%, the internet business 11.6%, the domestic fixed business 35.4%, the international fixed business 8.2%, and the remainder was from non- telecom business.

Costs and expenses

Total operating costs and expenses for the first nine months of 2009 were NT$104.0 billion, a decrease of 0.9% year-over-year. For the third quarter of 2009, total operating costs and expenses were NT$35.9 billion, a decrease of 1.3% compared to the third quarter of 2008. Decreases for the nine month and three month periods ending September 30, 2009 were mainly due to an operating cost decline at Senao that was the result of Senao's revenue decline, as well as decreased Chunghwa parent company depreciation expense.

Income Tax

Income tax expenses for the first nine months of 2009 were NT$10.0 billion, representing a decrease of 10.1% compared to NT$11.1 billion for the first nine months of 2008. This decrease was mainly due to the lower operating profit.

EBITDA and Net Income

EBITDA and operating profit for the first nine months of 2009 decreased by 6.6% to NT$70.6 billion and by 7.8% to NT$43.2 billion, respectively, primarily due to the revenue decrease. Net income was further depressed by the reduced interest income, resulting in a 9.2% decline year-over-year. EBITDA margin and the operating margin for the first nine months of 2009 were 47.9% and 29.4%, respectively, compared to a 49.7% EBITDA margin and 30.9% operating margin in the same period of 2008.

Similarly, EBITDA and operating profit for third quarter of 2009 decreased by 3.6% to NT$23.2 billion and by 2.9% to NT$14.2 billion, respectively. The reason for these declines is the overall revenue decrease. However, the EBITDA and operating profit margin for the third quarter of 2009, 46.3% and 28.3%, respectively, were relatively stable compared to the third quarter of 2008.

Net income decreased by 17.9% to NT$10.9 billion for the third quarter of 2009, which is a higher decline rate relative to the operating profit for the same period, primarily due to the revenue decline and the reversal of the mark-to-market valuation loss from the foreign exchange derivatives contract in 2008.

Capital Expenditure ("Capex")

Total capex for the first nine months of 2009 amounted to NT$16.6 billion, a 9.7% decrease compared to that of the same period in 2008. Of the NT$16.6 billion capex figure, 79.8% was used for the fixed-line and the internet businesses, 17.8% was used for the mobile business and the remainder was for other uses.

Cash Flow

Cash flow from operating activities for the first nine months of 2009 decreased by 11.5% to NT$49.5 billion compared to the first nine months of 2008. This was primarily because of the revenue decline which decreased EBITDA by NT$5.0 billion, as well as the NT$3.2 billion income tax refund the Chunghwa parent company received in the second quarter of 2008.

As of September 30, 2009, the Company's cash and cash equivalents totaled NT$55.8 billion, a decrease of 45.9% year-over-year compared to the same period last year, primarily due to the cash dividend distribution in September of 2009.

    Businesses Performance Highlights:

    Broadband/ HiNet Business
    -- Total broadband subscribers were 4.31 million as of September 30, 2009,
       a 0.4% decrease in the number of subscriptions compared to the same
       period of last year.  However, Chunghwa made important progress over
       the course of third quarter of 2009: There was a strong growth in FTTx
       subscriptions, with 165 thousand net additions to bring the total to
       1.51 million, compared to 1.34 million FTTx subscribers as of June 30,
       2009.  However, ADSL subscribers decreased by 161 thousand to 2.80
       million quarter-over-quarter. By the end of September 2009, the number
       of ADSL and FTTx subscriptions with a service speed of greater than 8
       Mbps reached 1.91 million, representing 44.4% of total broadband
       subscribers, compared to 34.8% at the end of September 2008.
    -- HiNet subscribers were 4.07 million at the end of September 2009,
       relatively stable as compared to the end of the second quarter of 2009.
       The increase in HiNet FTTx subscribers was offset by a decrease in
       HiNet ADSL subscribers of a similar magnitude.

    Mobile Business
    -- As of September 30, 2009, Chunghwa had 9.18 million mobile subscribers,
       slightly up quarter-over-quarter by 1.6% compared to 9.04 million as of
       June 30, 2009.
    -- Chunghwa remained the leading mobile operator in Taiwan. According to
       statistics published by National Communications Commission ("NCC"), at
       the end of August 2009, the Company's total subscriber market share
       (including 2G, 3G and PHS) was 34.5%, while its revenue share was 33.0%.
    -- Chunghwa had 384 thousand net additions to its 3G subscriber base
       during the third quarter of 2009, recording a 9.4% rise quarter-over-
       quarter in the total number of 3G subscribers to 4.49 million as of
       September 30, 2009.
    -- Mobile VAS revenue for the first nine months of 2009 was NT$6.18
       billion, representing a 18.8% year-over-year increase, of which SMS
       revenue was up 12.9% and mobile Internet revenue was up 48.1% ,
       respectively, compared to the same period of 2008.

    Domestic/International Fixed-line Businesses
    -- As of the end of September 2009, the Company maintained its leading
       fixed-line market position, with fixed-line subscribers totaling 12.51
       million.

Forecast for the Fourth Quarter 2009

As the user traffic continues to increase due to the overall economic recovery, Chunghwa currently estimates that the total revenue for the fourth quarter of 2009 will be relatively stable at NT$46.1 billion, compared to NT$46.7 billion revenue from the fourth quarter of 2008.

EBITDA for the fourth quarter of 2009 is estimated to be NT$20.8bn, operating profit NT$11.9bn and net income NT$9.3bn. While our EBITDA forecast is slightly down by 0.3%, operating profit and net income for the fourth quarter 2009 are expected to grow by 4.1% and 9.6% respectively, year-over- year.

    Chunghwa Telecom 4Q Financial Forecast on Non-Consolidated Basis

    (NT$ billion)        2008     2009E      YoY    4Q 2008   4Q 2009E    YoY
    Revenue             186.8     182.7     (2.2%)     46.7      46.1    (1.3%)
    EBITDA               95.1      90.1     (5.3%)     20.9      20.8    (0.3%)
    Operating Profit     57.2      54.0     (5.5%)     11.4      11.9     4.1%
    Net Income           45.0      42.5     (5.6%)      8.5       9.3     9.6%
    EBITDA margin      50.93%    49.30%              44.71%    45.16%
    Net income Margin  24.09%    23.25%              18.17%    20.17%

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
    Phone:   +886-2-2344-5488
    Email:   chtir@cht.com.tw

SOURCE Chunghwa Telecom