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Chunghwa Telecom Reports Consolidated Operating Results For The Third Quarter And First Nine Months Of 2012

Total revenue for the mobile business increased to NT$24.88 billion for the third quarter 2012, representing 4.7% year-on-year growth. The increase was primarily due to growth in mobile VAS revenue and handset sales from smartphone promotions offered through Senao, which offset a decline in mobile voice revenue due to market competition and the NCC tariff reductions.

Chunghwa's internet business revenue decreased by 6.1% year-over-year to NT$6.05 billion in the third quarter of 2012.  The decrease was primarily attributable to the previously mentioned government project, HiNet tariff reductions, the Company's voluntary broadband tariff reductions and the NCC tariff reductions.

For the third quarter of 2012, domestic fixed revenue totaled NT$18.94 billion, representing a 7.7% year-over-year decrease. In addition to the abovementioned government project, Local service revenue decreased by 4.2% year-over-year, mainly due to mobile substitution. Moreover, the 35.9% revenue decline in the DLD business was mainly due to the tariff reductions that began this year.

Broadband access revenue, including ADSL and Fiber connections ("FTTx"), decreased by 3.7% year-over-year to NT$4.82 billion, primarily due to the Company's voluntary broadband price reductions, as well as the mandated NCC tariff reduction.   

International fixed line revenue increased by 2.2% to NT$.3.86 billion primarily due to an increase in leased-line revenue.

Other revenue decreased by 44.3%, primarily due to a decrease in construction revenue from the Company's property subsidiary.

For the first nine months of 2012, total revenue was NT$164.01 billion, a 0.9% increase compared to the same period last year. This total was comprised of 45.8% mobile, 11.1% Internet, 34.4% domestic fixed, 6.9% international fixed, and the remainder was from other businesses.

Operating Costs and Expenses

Total operating costs and expenses for the third quarter of 2012 amounted to NT$42.30 billion, an increase of 1.1% compared to the same period of 2011. This increase was mainly from Senao's cost of handsets sold and personnel expense due to an early retirement program offered during the quarter. In line with the Company's strategy, maintenance, material, rental and depreciation expenses increased in order to support its broadband and mobile internet service build-out.

Total operating costs and expenses for the first nine months of 2012 increased by 5.7% year-over-year to NT$126.14 billion, mainly due to the higher cost of handsets sold, maintenance, material, rental and depreciation expenses.

Income Tax

Income tax expense for the third quarter of 2012 was NT$2.04 billion, representing a 1.6% decrease, compared to NT$2.08 billion for the same period of 2011.  

Operating Income and Net Income

Income from operations decreased by 12.8% to NT$12.10 billion. The operating margin was 22.2%, compared to 24.9% in the same period of 2011. Net income decreased by 14.6% year-over-year to NT$10.20 billion. Basic earnings per share decreased to NT$1.31.

Cash Flow and EBITDA

Cash flow from operating activities for the third quarter of 2012 decreased by 17.2% year-over-year to NT$15.77 billion, mainly due to the decline in income from operations compared with the same period of 2011.

EBITDA for the third quarter of 2012 decreased by 7.6% to NT$20.27 billion. The EBITDA margin was 37.3% compared to 39.4% in the same period of 2011. The lower EBITDA margin was primarily due to tariff cuts and the higher handset sales from our subsidiary Senao, of which the EBITDA margin is relatively lower than our traditional telecom services.

Capital Expenditure ("Capex")

Total capex for the third quarter of 2012 amounted to NT$8.33 billion, representing a 25.0% year-over-year increase. Total capex was comprised of; 56.9% domestic fixed communications, 19.2% mobile, 13.7% internet, 8.7% international fixed communications, and the remainder was for other uses.

Business and Operational Highlights

Broadband/HiNet

  • This year, the Company is continuing to execute its strategy of encouraging FTTx migration. As of September 30th, the number of FTTx subscribers reached 2.67 million, accounting for 58.5% of total broadband users. Moreover, the number of subscribers signing up for 50M connections reached 818 thousand.   
  • HiNet broadband subscribers totaled 3.77 million at the end of September 2012, representing a year-over-year increase of 2.6%.   

Mobile

  • As of September 30th, 2012, Chunghwa had 10.21 million mobile subscribers, representing a 2.5% year-over-year increase.
  • As of September 30th, 2012, the Company had 2.22 million mobile internet subscribers, demonstrating strong growth of 68.5% year-over-year. The company revised up its subscribers target for the end of 2012 from 2.35 billion to 2.45 million due to this strong growth momentum.
  • Mobile VAS revenue for the third quarter of 2012 increased by 36.5% year-over-year to NT$5.35 billion, with mobile internet revenue, the largest contributor to VAS revenue, increasing 51.5% year-over-year.    

Domestic/International Fixed-line

  • As of September 30, 2012, the Company maintained its leading position in the fixed-line market, with total 11.85 million subscribers.
  • As of September, 30 2012, Chunghwa's Multimedia-on-Demand (MOD) subscriber base exceeded 1.17 million subscribers.

Financial Statements

Financial statements and additional operational data can be found on the Company's website at http://www.cht.com.tw/ir.

NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Statements that are not historical facts, including statements about Chunghwa's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Investors are cautioned that actual events and results could differ materially from those statements as a result of a number of factors including, but not limited to the risks outlined in Chunghwa's filings with the U.S. Securities and Exchange Commission on Forms F-1, F-3, 6-K and 20-F, in each case as amended. The forward-looking statements in this press release reflect the current belief of Chunghwa as of the date of this press release and Chunghwa undertakes no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such date, except as required under applicable law.

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