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Chunghwa Telecom Co., Ltd. (CHT)

Q2 2012 Earnings Call

August 30, 2012 05:00 am ET


Fufu Shen - Director, IR

Shyue-Ching Lu - CEO

Shu Yeh - CFO


Chate Ben - Credit Suisse

Andy Chu - Nomura

Joseph Quinn - Macquarie

Piyush Mubayi - Goldman Sachs

Neale Anderson - HSBC

Steven Liu - Standard Chartered

Sydney Zhang - Bank of America Merrill Lynch


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Good evening ladies and gentlemen. Welcome to Chungwa Telecom conference call for the company’s first half 2012 operating results. During the presentation, all lines will be in a listen-only mode. When the briefing is finished, direction of submitting your question will be given in the question-and-answer session. For your information, this conference call is now being broadcasted live over the Internet. A webcast replay will be available within an hour after the conference is finished. Please visit under the In Focus section.

Now I would like to turn over to Fufu Shen, the Director of Investor Relations. Ms. Shen, please go ahead.

Fufu Shen

Thank you. This is Fufu Shen, Investor Relations Director of Chunghwa Telecom. Welcome to our second quarter 2012 results conference call. Joining me on the call today are Dr. Lu, Chairman & CEO and Dr. Yeh, CFO.

During today’s call, management will first discuss business, operational and financial highlights, then followed by Q&A

On Slide no 2, please note our safe harbor statement. Now I would like to turn the call over to Chairman Lu.

Shyue-Ching Lu

Thank you, Fufu and hello, everyone. This is Shyue-Ching Lu, Chairman of

Chunghwa Telecom. Thank you all for joining our second quarter 2012 earnings results conference call. First of all, I am pleased to announce the promotion and appointment of our new President, Dr. Yen-Sung Lee, who has assumed the new role as of yesterday, August 29.

Dr. Lee will oversee all of Chunghwa’s daily operations. Previously, Dr. Lee was the Senior Executive Vice President, supervising the marketing and IT departments. With his extensive engineering and management background, he has significantly contributed to the development of our ICT & Cloud businesses. Having been with Chunghwa for over 30 years, I am confident that Dr. Lee will continue to make further contributions to our future growth.

Please refer to slide 3 for our second quarter overview. Before entering into our business segments, I would like to highlight several points to you as follows. Even though we continue to experience heavy NCC regulatory pressure and intense market competition, we were pleased that our first half results were in line with our earlier guidance.

Faced with an evolving telecom landscape and the fierce market competition, we continue to evaluate these changes while also taking proactive steps in key growth areas to help stabilize our overall business. As an example, mobile value added service business continues its growth momentum. In order to accelerate the mobile VAS growth, we began offering different promotional packages bundling free on-net call services with data packages.

These packages are designed differently to target and appeal to various types of mobile subscribers and we have begun to see some good success with such offerings, which I will discuss shortly.

For our broadband business, we continue to see our growth in subscribers for high-speed fiber connections remaining on track, especially demand for our faster, 50 megabits per second connections. We will continue to promote our high-speed fiber connections to new customers, we will also continue to encourage current customers’ migration, both of which will further provide incremental ARPU.

The successful broadcasting of 2012 London Olympic Games demonstrated our capability to offer multi-screen high-definition services on our platforms. Moreover, the operation of our new MOD platform, which includes interactive capabilities, was approved by the NCC in June. We expected that this new, interactive platform will help facilitate the convergence of our digital service offerings which we believe will be a key trend going forward.

Let’s go through our businesses. On slide 5. For our mobile operation, we plan to maintain our leadership by further providing reliable and the seamless wireless access under great customer service to our subscribers while attracting new customers with our price competitive mobile plans.

By leveraging our customer base through attractive data plan upgrades, smartphone adoption remains on track. In fact, for the first half of 2012, smartphones accounted for 67% of all new handset sales. As a percentage of postpaid subscribers, smartphone penetration increased to 32% by the end of the second quarter.

By year-end, we expect this rate to approach 39%. In addition, we are in the process of expanding and transforming many of our retail stores. We believe this effort to improve the layout and the customer services experience for current and potential subscribers will create an impressive and pleasant user experience. We hope that such changes will lead to improved customer experience, satisfaction and loyalty for years to come.

Moving to slide 6. Mobile internet service revenue continued its strong momentum in the second quarter of 2012 with over 54% year-over-year growth. As discussed earlier, we believe that this trend will sustain as we continue to see adoption in smartphones and other mobile internet devices and we are actively promoting further adoption.

For example, this year, we began a promotional program focused on data plan adoption with free on-net calls. Our Student Data Plan, which is meant to attract students and young customers, saw a 90% uptick rate from existing customers who were not data users previously.

We will continue to encourage our large base of mobile subscribers to upgrade to data plans through such promotional efforts. In addition, we’ll also continue targeting new user growth and further expanding our market share.

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