Chunghwa Telecom Q4 2024 Earnings Report

Chunghwa Telecom EPS Results

• Actual EPS: $0.36
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Chunghwa Telecom Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Chunghwa Telecom Announcement Details

• Quarter: Q4 2024
• Date: 1/23/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 23, 2025
• Conference Call Time: 2:00AM ET

Chunghwa Telecom (NYSE:CHT) Co., Ltd., together with its subsidiaries, provides telecommunication services in Taiwan and internationally. It operates through Consumer Business, Enterprise Business, International Business, and Others segments. The company offers local, domestic long distance, and international long distance fixed-line telephone services; mobile services such as prepaid and postpaid plans; broadband plans; and internet and data services. Chunghwa Telecom Co., Ltd. was incorporated in 1996 and is headquartered in Taipei City, Taiwan.

Chunghwa Telecom Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the Company's 4th Quarter 2024 Operating Results. During the presentation, all lines will be on listen only mode. When the briefing is finished, directions for submitting your questions will be given in the Q and A session. And for your information, this conference call is now being broadcasted live over the Internet and webcast replay will be available within an hour after the conference is finished.

[Operator]

Please visit CHT IR website, www.cht.com.twirundertheircalendar section. And now I would like to turn the call over to Ms. Angela Tai, Assistant Vice President of Investor Relations. Thank you. Ms.

[Operator]

Cai, please go ahead.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

Thank you. I'm Angela Cai, Assistant Vice President of the Financial Department for Zhonghua Telecom. Welcome to our Q4 2024 results conference call. Joining me on the call today are our President, Rongxing Lin and our Chief Financial Officer, Audrey Xu. During today's call, management will begin by providing the CEO's the recent achievements of our company and our business overview of the Q4, followed by a discussion of our segment performance and the financial results.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

After, we will move on to the question and answer portion of the call. On Slide 2, please read our disclaimers and note concerning forward looking statements. Now without further delay, I will turn the call over to President. President Lin, please go ahead.

[Rong-Shy Lin, President at Chunghwa Telecom]

Thank you, Angela, and hello, everyone. Welcome to our Q4 2024 results conference call. To begin with, I would like to report our exceptional financial performance for year 2024. Thanks to our team's relentless efforts, Agua Telecom's operating income, income before tax and the EPS for 2024 all exceeded the upper end of our forecast, highlighting our strong execution and effective strategic direction. Revenue wise, our 4 years revenue reached a 7 years high, driven by robust growth across all of our business sector.

[Rong-Shy Lin, President at Chunghwa Telecom]

Notably, our 4 year EPS of NT4.8 also marked a 7 years high, continuing the streak of 5 consecutive years of annual growth. This achievement underscore our unwavering commitment to innovation, operational excellence and delivering sustained value for our stakeholders. In collaboration with NTT, we showcased an ultra low latency immersive video show in the Q4 via the world's first international off atomic network connection powered by ION technology. We successfully reduced the VR induced the thickness in the exhibition enabling the new virtual viewing solution. Additionally, our partnership in open RAN cooperation opens new avenues for global opportunities.

[Rong-Shy Lin, President at Chunghwa Telecom]

Joao Telecom, the only telecom in Taiwan capable of offering open RAN testing has successfully supported Taiwanese vendors in securing funding from the U. S. Government for open RAN development. The collaboration highlights our cutting edge technological capability and the unique position in accelerating commercialization of the open RAN within value chain. Furthermore, we look forward to utilizing OneWeb and SES satellite resources to roll out commercial services by the first half of twenty twenty four, further driving the growth in satellite related revenue.

[Rong-Shy Lin, President at Chunghwa Telecom]

Lastly, I would like to highlight that in the Q4, we once again maintained our position in 2024, Baozong's Sustainability World Index and Emerging Market Index. We also received the highest honor from the asset. ESG Corporate Jet Award and represents only Taiwanese Telecom included in the Newsweek's Most Trustworthy Companies 2024 List. This recognition reaffirmed our commitment to sustainability and the leadership in the responsible business growth. Looking ahead into 2024, Dua Telecom is confident in maintaining its leading position across all key benchmark in our industry.

[Rong-Shy Lin, President at Chunghwa Telecom]

Now let's move on to the business overview of the Q4 of 2024. Please turn to Page 5 to review our leading position in Taiwan's mobile market. Based on the statistics from Taiwan's telecom regulator of November, our overall subscriber shares of Taiwan's mobile market reached 37.9%, achieving its 11th consecutive quarter over quarter increase. We are happy to see ongoing subscriber growth. Even more excitingly, our 5 gs subscriber share surpassed our mobile subscriber share, reaching 38.8% and maintaining our position as an industry leader.

[Rong-Shy Lin, President at Chunghwa Telecom]

We are glad to see our year over year growth of the postpaid subscribers increase 200,000 with a significant growth of 700,000 in 5 gs postpaid subscribers. Additionally, our revenue share maintained the highest in the industry at 40.3%, consistently outperforming our subscriber share and reflecting our strong and healthy growth. According to the financial disclosure of domestic industry players, we also learned that from January 2024, our quarterly subscriber net adds outperformed the peers for every quarter throughout this year. Along with our steady 5 gs penetration, our mobile service revenue recorded 1.7% year over year increase in the 4th quarter and 3% year over year growth of the full year of 2024. In the 4th quarter, we are pleased to see the average monthly fee uplifted from 5 gs migration showing a 45% increase, maintaining its healthy momentum.

[Rong-Shy Lin, President at Chunghwa Telecom]

Let's move on to the Slide 6 for an update of our outperforming fixed broadband business. In the Q4, our cross tier upgraded promotion package continued to be well received as more than 70% of the package adopters choose service offering of 300 megabits per second and above, including the highest speed offering of 1 gigabit per second. As a result, on the year over year basis, the number of subscribers with speeds of 300 megabits per second and above increased by 17%, maintaining its double digit growth and our subscriber net adds of 1 gigabits per second service doubled, which is encouraging. Given the success, our total number of fixed broadband subscriber also saw an increase in the Q4. Thanks to our successful speed upgrade strategy, our fixed broadband revenue and ARPU continued to increase by 2.9% and 1.7% on year, respectively.

[Rong-Shy Lin, President at Chunghwa Telecom]

And we are confident that this growth will persist. Now let's get a close look at the performance of our business group. Page 8 presents our CVG's performance. In the Q4, the total CVG revenue increased by 2.2% year over year, driven by the increase of mobile service revenue, resulting from 5 gs migration and the subscriber growth, along with the increased fixed broadband revenue owing to the successful speed upgrade strategy. In addition, sales revenue rose year over year, mainly due to the stronger smartphone sales.

[Rong-Shy Lin, President at Chunghwa Telecom]

Our CVG's income before tax grew RMB 077,000,000,000 year over year, primarily due to the strong performance of our core business and onetime impairment loss recognized in the Q4 of 2023. Slide 9 further illustrates our consumer business group highlights. In the Q4, our multiple play packages with service offering of mobile, fixed broadband and the WiFi altogether continued to deliver outstanding year over year growth of 57%. This success is attributable to the strength of our quality networks and the effectiveness of our reward point strategy. In the Q4, we were extremely proud to see that Taiwan won the World Basketball Confederation's Premium 12 for the first time.

[Rong-Shy Lin, President at Chunghwa Telecom]

This remarkable event following the popular Olympic Games in the 3rd quarter further boosted our video service subscription, which reached a record high with 15.2% year over year increase with particular growth from our OTT brand, Hamidio. Revenue from both subscription and advertisement on the platform continue to grow as well and we are committed to maintain the positive momentum by consistently investing in the popular content going forward. In addition, our consumer cybersecurity subscription also surged by 22 years over years in the Q4, steadily increasing its revenue contribution as expected. Thanks to our ongoing effort in the business mentioned, we have reached a milestone of 3 1,000,000 subscriber service as of December 2024, including around 2,000,000 Wi Fi device subscription, more than 1,000,000 subscription of Harmony Videos and the consumer cybersecurity services. We are optimistic with continued growth in the coming year.

[Rong-Shy Lin, President at Chunghwa Telecom]

Please turn to Slide 10 for an overview of our enterprise business group performance. In the Q4, EBG's total revenue increased by 10.2% year over year, primarily driven by robust 24.1 year over year growth in ICT Business revenue. Major growth drivers such as IDC, cloud and cybersecurity services all delivered strong performance and demonstrated around 50% year over year growth, fueled by both project and recurring revenue. Despite the ongoing 5 gs migration and the fixed broadband speed upgrades, which continue to positively contribute to related service revenue, The decline in mobile voice revenue and the fixed voice revenue resulted in relatively flat year over year performance in our EVG score core business. This in turn contributed to a decline in EVG's income before tax on a year over year basis.

[Rong-Shy Lin, President at Chunghwa Telecom]

Slide 11 illustrated our enterprise business highlights. We are excited to report the strong performance of our IC Emerging business in the 4th quarter with kids revenue increased by 24 percent 23% year over year. The growth was driven by strong performance across our major pillars and the recurring revenue growth from all service offering. For our IDC, cloud and the cybersecurity business, we saw a year over year revenue increased of 62%, forty 2 46% and 56%, respectively. For IDC Business, we were happy to see revenue contribution from several large project completed for the high-tech companies in Taiwan as well as the successful construction of the 1st overseas AIDC in Mexico for our enterprise customer.

[Rong-Shy Lin, President at Chunghwa Telecom]

Additionally, higher margin rates and the new IDC in operation also contributed to recurring revenue, ensuring the group maintain a stable consolidated IDC market share in Taiwan at more than 50%. Also in Q4, our cybersecurity business achieved its 12th consecutive quarter of year over year growth, including subsidiary contributions. For the Q4, we are proud to report that the successful development of Taiwan First 5 gs unmanned vehicle solution for smart harbor inspection. This solution are capable of operating across land, sea and the sky. In evolving robots to handle post transportation, unmanned vehicles to clean marine pollution and the drone to rescue in water in water.

[Rong-Shy Lin, President at Chunghwa Telecom]

We expect to further extend this application into other sectors, including firefighting, cost of petroleum, forest ecosystem protection, etcetera. Lastly, we remain optimistic about AI driven opportunities this year. We have leveraged generative AI technology to deliver projects in smart government and health care sectors, enhancing efficiency and reducing manpower cost. Through chatbots for troubleshooting and information retrieval. Additionally, we are utilizing AI medical assistance to generate medical summarize and reduce paperwork.

[Rong-Shy Lin, President at Chunghwa Telecom]

We see and we believe that more generative AI application will emerge to create opportunities in the future. Slide 12, it is traded our international business group performance. In the 4th quarter, IBG's total revenue dipped slightly by 2.3%, mainly due to the decline in international voice revenue. However, as our robust IDC business grew and its demand continued to increase, IBG's income before tax increased year over year. As we continue to expand our IDC business to cater to the increasing demand, In the Q4, we are glad to close a contract with a well known global hyperscale.

[Rong-Shy Lin, President at Chunghwa Telecom]

This agreement secures capacity in our under construction IDC for the higher scale and ensures the long term stable revenue generation of Zhongta Telecom. Additionally, our overseas subsidiaries has achieved a remarkable business success worldwide in 2024 by providing our ICD solution to high-tech companies in Japan and the United States as well as providing ICD total solution to the PCB industry in Southeast Asia and providing our exceptional capabilities. More excitingly, our CapEx allocation in undersea cables has also yielded positive results. Although the SAC2 and the Africa, international submarine cable is still awaiting completion. Currently, 80% of the capacity we invested in was sold in the Q4 of 2024.

[Rong-Shy Lin, President at Chunghwa Telecom]

This is expected to bring revenue in the second half of this year, reflecting strong demand for the international bandwidth and the success of our investment strategy. Now I would like to turn the call to Eldrie for our financial highlights.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

Okay. Thank you, President Lin. Good afternoon, everyone. It's my pleasure to present an overview of our financial performance for the Q4 of 2024 and share our financial guidance for 2025. Let's turn to Page 14, which highlights our income statement.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

For the Q4 of 2024, revenue exceeded $65,000,000,000 This represents a 5.6% increase compared to the same quarter last year. This growth was primarily driven by significant expansion in our ICT business. Income from operations and net income increased by 11.5% and 9% respectively. Additionally, earnings per share for the quarter reached 1.16, marking the highest 4th quarter EPS in 9 years. Let's now move to the columns for the full year of 2024 as we shift our focus from quarterly to annual performance.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

For the entire year, revenue increased by 3.1% compared to 2023 driven by sustained strong performance across ICT, mobile and broadband services. Income from operation and net income increased by 1.1% and 0.8% respectively, highlighting the steady growth of our core and ICT business. Earnings per share for the whole year reached 4.8%, while the EBITDA margin remains stable at 37.6%. This solid performance reflects the resilience and strength of our operations. Now let's move on to Page 15 to review the balance sheet highlights.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

At the end of the 2024, total asset increased by 2% compared to 2023. The increase was largely attributable to the growth of our cash, other current monetary asset and long term investments. Also, property planning equipment decreased primarily because the addition of new assets were less than a depreciation recognized. Total liability increased by 5.7% relative to the year end of 2023, primarily due to the increase in accounts payable and contract liabilities. Additionally, debt ratio remains stable and net debt over EBITDA remained at 0.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

A low debt level not only underscores our company's commitment to fiscal responsibility, but also enhances our resilience against economic uncertainties. So taken together, these metrics demonstrate the robustness and stability of our balance sheet. Now let's turn to Page 15, which provides the summary of our cash flows. Cash flows from operating activities increased by 6.2% year over year, primarily due to the increase in accounts payable and contra liabilities between 20242023. Capital expenditure for the year 2024 was 28.82 $1,000,000,000 reflecting a 6.2 percent year over year decline and achieving 15% savings compared to the budgeted amount announced in our 2024 forecast.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

The reduction is part of our approach to optimize capital allocation. As a result, free cash flow increased by 14.9% on year, highlighting the strength of our operating efficiency and disciplined financial management. The robust free cash flow enhances our financial flexibility. This enable us to pursue strategic growth opportunities while we enforce our long term sustainability. Okay.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

Earlier, I was comparing our results relative to last year. Now, shifting focus to compare our 2024 performance relative to our forecast. On Page 17, you will see the table summarize our operating performance relative to our forecast. During the Q4 of 2024, revenue exceeded our targets. Key performance measures, including income from operation, net income and EPS were all in line with our forecast.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

The performance was supported by ongoing efforts to streamline operation and control cost. Store network construction activity also results in depreciation expense coming in below expectations. Moving to the column for the full year, revenue in 2024 aligned with our forecast. In addition, income from operations, net income and EPS all surpass our guidance. This better than expected results were primarily driven by the steady growth of our core business and enhanced profitability of our ICT segment.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

This concludes our review of the financial results for the Q4 and the full year of 2024. Finally, I would like to provide our forecast for 2025. Moving on to Slide 18, please refer to our guidance for 2025. Looking ahead, we anticipate total revenue for 2025 to grow by 1.2% to 1.6% compared to 2024. The growth is expected to be driven by strong growth momentum in our core business, supported by the success of our 5 gs service and broadband speed upgrade promotions, which are boosting our subscriber numbers and ARPU.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

Additionally, ICT business is also expected to contribute to revenue growth as we continue to see digital transformation opportunities in the market. For operating costs and expenses, we are expecting it to rise by 2.4%, re vetting our continued investment in talents, including enhancement to employee benefits and ongoing infrastructure that support future business development in core and emerging business and also higher electricity costs stemming from rate adjustment, which would also trade off operation and maintenance expense. Given these projections, we expect our EPS to be in the range between $4,620,000,000 $4,82,000,000 In terms of CapEx, we had budgeted $32,360,000,000 for 2025. Our mobile related CapEx is expected to decline by 13.3% on year. This continues a full year consecutive downtrend since 2021.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

In contrast, non mobile related capital expenditures are expected to increase by 25.2% year over year, driven by investments to support business expansion into AI, Internet data center, the constructing of submarine cables and other strategic initiatives. Our capital expenditure strategy focus on maintaining a competitive edge, enhancing network resilience and security and advancing ESG commitments by eliminating energy intensive equipment. Thank you for your attention. At this time, we would like to open the door for questions.

[Operator]

Yes, thank you. Ladies and gentlemen, we are now in Q and A session. If you have a question for any of today's speakers, We will begin taking questions from telephone line and then move to queries from the web page. Thank you.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

Okay. We received a question from our platform. Could you please elaborate a bit on how much we are investing in AI and some key initiatives or revenue opportunities this year.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

As I just mentioned that for the focus of the CapEx for the non mobile parts, there is increase of the CapEx in AIDC center. We don't disclose the crackdowns for our mobile CapEx, but we can give you some overview of our company's mission to related to AI. We are fully committed to leverage AI to enhance our operations and drive digital transformation for our business. So the through strategic partnership and innovation, we basically we will cover the internal AI application. We will also cover the external that's something that AI infrastructure and platforms give you some example that AI data center, we launched sovereign AI service, optimize cloud resources and integrate AI solution across cloud and on premise environments with a focus on sustainability intelligence.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

Also, we also have AI factory, we provide cross cloud path solution, including standardized public cloud bundles and resource management. And we also build some SaaS capabilities, including domain specific AI models, digital twins and AI GJIN. So other than that, we may also strengthen our AI capabilities through collaboration with leading academic institutions, research centers, cloud providers and NVIDIA to accelerate development and deployment. So this is just to give you some overview of our strategy for the AI in the coming years.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

Okay. Thank you, Audrey. We have another question. It's about the outlook of the ICT business in 2025. Okay, for the ICT business, in 2024, we have got to see that our ICT revenue has successfully exceeded our full year guidance.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

And for 2025, we are also focused on the our major pillars of the ICT services like the IDC, cloud, cybersecurity, 5 gs, private network, the sectors that we have a great performance in 2024. And what we have to do is that we will focus more on improving our ICT project margin to enhance the overall ICT performance. In addition, as the recurring revenue percentage continue to increase in the percentage of the total ICT revenue. We think that the increase of recurring revenue will further stabilize our ICT revenues and further increase the overall ICT margin in 2025.

[Operator]

Thank you.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

We have one more question from the platform. It's about do you have any plans to improve shareholder return like raising the payout?

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

As mentioned before that maximum of shareholder returns is always one of the key objective of our corporations. As the dividend policy, we are a company that focus very much on sustainability, keeping us sustained dividend policy is always our goal. And dividend policy is subject to the Board of Directors approval. But I expect that the policy will based on the will be consistent with the previous policy. So as the EPS increase continuously, we may expect that shareholders will receive a continuous increase in dividends following based on our consistent dividend policy.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

So this is the basic guidance.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

Thank you, Audrey. And we have another question is, given the non mobile CapEx is going up by sharp 25% in 2025. Can you provide more details about where this CapEx is going, including how much is going for AI data centers?

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

Thanks for the question. As I mentioned that we don't disclose the breakdowns of our non mobile CapEx. But as we mentioned, many of our segments from the for the corporation ICT, you can imagine that we will deploy our capital resources based on mainly like AIDC center, the submarine and satellite etcetera. So just give you as you can see that we see the digital transformation opportunities in the market, mainly from the AI and also cloud computing and also the cybersecurity. And this is our old engine, the growth engine for the company.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

So although that at this moment that 25% increase is the expectation, but we believe that I just want to remind you that our CEO will always want us to try to simplify to apply the eighty-twenty rule to prioritize resources on the most impactful projects, ensuring optimal of the patient and maximum returns. We think that the actual spending of this year will probably will decrease if that the 80%, 20% rule to do the right things right principle continue to be apply. We will streamline our operations. So we probably will save more capital expenditures in the future.

[Operator]

Thank you.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

Okay, thank you. We have we got another question. In terms of the revenue guidance of 1.2 to 1.6 in 2025, could you elaborate more on the growth drivers and breakdown of different segments?

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

Building on the foundation of our success in 2024, we believe this position us for a strong future. So in I just tried to remind you in 2024, we maintain our leadership in Taiwan's mobile market. We achieved 40% of revenue and growth in 5 gs postpaid subscription. And we also have a 38.8% of 5 gs subscriber, marketing in Taiwan. And also fixed broadband, if you remember our cross tier upgrade promotion also provide very highly effective doubling 1 gs subscriber net adds with over 70% of adopters choosing 300 MBBs and above.

[Wen-Hsin Hsu, Senior EVP & CFO at Chunghwa Telecom]

So this strong performance, we believe that we can set a stage for the long term opportunity and for the 2025. So the growth opportunities, we will like to continue this momentum in the mobile industry in mobile. And other than that, I just share a lot about the ICT opportunity. We still believe that the high growth will come in a lot from through the ICT business segments.

[Operator]

Thank you.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

Okay. We have one more question from the platform that is about our CapEx breakdown. I think for the CapEx for the CapEx budget for 2025, as our CFO said, the mobile CapEx continue to decline. And the non mobile for non mobile mobile parts, we have some increase that's because that's the increase mainly from the fixed line because the fixed line is the backbone now to support the mobile and the fixed line services. And then the IDC and the undersea cable, because we see great demand from the markets that's to require more capacity from the international bandwidth.

[Angela Tsai, AVP - Investor Relations at Chunghwa Telecom]

And then we see as we disclose from the presentation, you can see that we secure a lot of contracts with the hyperscaler to co locate in our IDC. So that as we see the growth opportunities, so we continue to invest in these kind of areas. Thank you.

[Operator]

Thank you, ladies and gentlemen. If there are no further questions, I will turn it back to over to President Lin. President Lin, please begin.

[Rong-Shy Lin, President at Chunghwa Telecom]

Thank you for your participation and Happy New Year.

[Operator]

Thank you, President Lin. And ladies and gentlemen, we thank you for your participation in Chunghwa Telecom's

Participants

Executives

• Angela Tsai, AVP - Investor Relations
• Rong-Shy Lin, President
• Wen-Hsin Hsu, Senior EVP & CFO