CHT Chunghwa Telecom Co Ltd

Chunghwa Telecom Co. Ltd. (CHT) declared financial results for the first quarter of 2011. Quarterly, GAAP net income was approximately $385.7 million, down 1% year over year.  However, net earnings per ADR were 48 cents, up 21.7% year over year. Total revenue, in the first quarter of 2011, was approximately $1,789.4 million, up 5.8% year over year. This encouraging performance was the combined result of handset sales together with continuously growing revenue from both mobile value-added services (VAS) and Internet services.

Quarterly operating income was $475.5 million, down 6.3% year over year. Operating margin was 26.6% compared with 30% in the year-ago quarter. First-quarter 2011 EBITDA was $750.2 million, down 6.6% year over year. Quarterly EBITDA margin came in at 41.9% compared with 47.5% in the prior-year quarter.

During the first quarter of 2011, Chunghwa generated around $331.7 million cash from operations, down 38% year over year. Capital expenditure during the reported quarter was around $149.2 million, up 5% year over year.  

At the end of the first quarter of 2011, Chunghwa had approximately $2,557.6 million of cash & cash equivalents and around $110.4 million of outstanding debt on its balance sheet compared with $3,000 million of cash & cash equivalents and $112.7 million of outstanding debt at the end of fiscal 2010.

Segment wise Revenue

Mobile Communications segment accounted for $779 million of the total first-quarter 2011 revenue, up 2.8% year over year. Internet segment accounted for $207.3 million, up 3.6% year over year. Domestic Fixed-line Communications segment generated $827.5 million, up 11.6% year over year. International Fixed-line Communications segment accounted for $129.2 million, down 4.5% year over year. Non-telecom Business segment generated the remaining $19.5 million, up 4% year over year.

In the reported quarter, Broadband access (including ADSL and FTTX) revenue was $178.3 million, up 3% year over year. Mobile VAS revenue was $120 million, up 38.6% year over year. Internet VAS revenue was $19.5 million, up 17.1% year over year.

Subscriber Statistics as of March 31, 2011

Total Broadband subscriber base was 4.4 million. Out of this, FTTx subscriber base was 2.12 million, accounting for 48.1% of total broadband subscriber base. HiNet subscriber base was 3.61 million, up 1.9% year over year. Mobile subscriber base was 9.78 million, up 4.5% year over year. Of the total, 3G wireless subscriber base was 5.6 million, comprising an impressive 57.3% of total mobile subscriber base and up 13.7% year over year. During the first quarter, Chunghwa added 177,000 net 3G subscribers. International /Domestic Fixed-line subscriber base was 12.29 million.

Recommendation

Chunghwa competes in a tough environment with Taiwan Mobile Company and Far EasTone Telecommunications Co. Ltd. We expect fierce competition going forward as the Chinese giant China Mobile Ltd. (CHL) has purchased a significant stake in Far EasTone Telecommunications. We, therefore, maintain our long-term Neutral recommendation on Chunghwa. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.

 
CHINA MOBLE-ADR (CHL): Free Stock Analysis Report
 
CHUNGHWA TELECM (CHT): Free Stock Analysis Report
 
Zacks Investment Research