Chunghwa Telecom’s Earnings Call: Strong Growth Amid Challenges

Chunghwa Telecom ((CHT)) has held its Q3 earnings call. Read on for the main highlights of the call.

Chunghwa Telecom’s recent earnings call paints a picture of a company thriving in several key areas, yet facing some challenges. The sentiment expressed was largely positive, highlighting robust performance in core and ICT services, successful international ventures, and strategic advancements in AI and cybersecurity. However, the company is not without its hurdles, as declines in fixed voice revenue and free cash flow pose ongoing challenges.

Record Third Quarter Revenue

Chunghwa Telecom reported its highest third quarter revenue since 2017, with a 4.2% year-over-year increase. This impressive growth was primarily driven by strong performance in its core business and ICT services, underscoring the company’s strategic focus on these areas.

Growth in Mobile Market Share

The company achieved a mobile revenue market share of 40.8%, with subscriber share increasing to 39.4%. This represents a significant 1.6 percentage point increase year-over-year, reflecting Chunghwa Telecom’s competitive edge in the mobile sector.

5G and Fixed Broadband Performance

Chunghwa Telecom’s 5G subscriber market share rose to 38.8%, with a penetration rate of 44.7%. Additionally, fixed broadband revenue grew by 3.2% year-over-year, driven by an increase in high-speed subscribers and ARPU.

Successful AI and Cybersecurity Initiatives

The company received recognition for its AI capabilities, securing first place at the Global AI City Challenge. Furthermore, its cybersecurity subsidiary went public, and the launch of InventAI marked significant strides in these strategic areas.

Strong Enterprise ICT Growth

Enterprise ICT revenue saw a 14% year-over-year increase, bolstered by substantial growth in IDC, cloud, and cybersecurity services. This highlights Chunghwa Telecom’s successful expansion in the enterprise ICT market.

International Expansion

Chunghwa Telecom’s U.S. subsidiary achieved a remarkable 70% year-over-year revenue growth. The introduction of proprietary solutions to global markets further underscores the company’s successful international expansion efforts.

Financial Performance

The company’s income from operations rose by 6.4%, and net income increased by 4.8% year-over-year, resulting in an EPS of TWD 1.22, the highest third quarter EPS in eight years. This financial performance reflects Chunghwa Telecom’s strong operational efficiency.

Decline in Fixed Voice and International Business

Despite overall positive performance, Chunghwa Telecom faced a decline in fixed voice revenue, impacting EBG income before tax. Additionally, IBG revenue decreased by 1.9%, with a 19.7% drop in income before tax, highlighting areas of concern.

Lower Free Cash Flow

Free cash flow decreased by 16.5% year-over-year, affected by increased capital expenditures and changes in working capital timing. This presents a challenge for the company’s financial flexibility.

Forward-Looking Guidance

Looking ahead, Chunghwa Telecom has set ambitious targets, with expectations of continued strong performance in core telecom and ICT services. The company aims to maintain its growth trajectory in mobile market share and 5G penetration, while further expanding its international presence. The enterprise ICT sector is poised for further growth, driven by cloud and cybersecurity services.

In summary, Chunghwa Telecom’s earnings call reflects a company that is performing well in its core and ICT services, with successful international expansion and strategic advancements in AI and cybersecurity. However, challenges remain in the form of declining fixed voice revenue and reduced free cash flow. Investors will be keen to see how the company addresses these issues while capitalizing on its growth opportunities.