Chunghwa Telecom Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 8, 2023

There are 4 speakers on the call.

Operator

Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the Company's Second Quarter 2023 Operating Results. During the presentation, all lines will be in a listen only mode. When the briefing is finished, directions for speaking your questions will be given For your information, this conference call is now being broadcasted live over to Internet. A webcast replay will be available within an hour after the conference is finished.

Operator

Please visit CHT IR website, www.cht.com.cwir on the IR calendar section. Now, I would like to turn it over to Ms. Jill Cai, Director of Investor Relations. Thank you. Ms.

Operator

Cai, please go ahead.

Speaker 1

Thank you. I'm Angela Tsai, Assistant Vice President of China Telecom's Financial Department. Welcome to our Q2 2023 results conference call. Joining me on the call today are Harrison Kuo, our Chairman and CEO Alvin Lin, our recently appointed President and Jingping Chen, our Chief Financial Officer. Before I turn the call over to Chairman Ho, I would like to briefly introduce our new President, Doctor.

Speaker 1

Alvin Wing. Alvin Wing has a PhD degree in Electronic Engineering from National Taiwan University of Science and Technology. He has served in various leadership positions in the areas of information technology, enterprise business and telecom laboratory, Zhenhua. Plus, Tianming also has a specialized interest and experience in IT advancements and AI related development. I'd like to please read our disclaimers and notes concerning our forward looking statements.

Speaker 1

Now without further delay, I will turn the call over to Chairman. Chairman, please go ahead.

Speaker 2

Thank you, Angela. Hello, everyone. Ivan Lim. We are happy to have his participation on today's call. Before Kevin walked us through our business overview in the segment performance, I would first like to share our views and the exploration for Songhwa Telecom on Slide 4.

Speaker 2

Innovate and create value for customers, strategic partners, shareholders and employees. Are recognized for sustainable development as well as our vision brand for digital ecosystems and analysts for executing the market value of 1,000,000,000,000 landscape and further extend our business given our exclusive technology and solid service capabilities. We believe digital transformation trend enhance the overall value for the industry, of course, including ourselves. In July, Benoit invited the New York Stock Exchange to celebrate the 20th anniversary for our OYSE listing. We greatly appreciate

Speaker 3

Thank you, Chairman Guo, and hello, everyone. I'm Ivan. I'm honored to be here today and happy to share the details of our Q3 business results. On Slide 5, please find our entire mobile marketing in Taiwan's further consolidated towards sales and structured, And we are expecting to see our revenue share in the Taiwan mobile marketing had lower velocity increase on a year over year basis from 39.2 percent to 39.9 percent, whereas quarter over quarter, growth is from 39.7%. Our subscriber share also climbed to 37% and 36.3% compared with the Q2 of last year.

Speaker 3

As a result, our incremental existing revenue share above our subscriber share increased to 2.09%, reflecting our healthy subscriber structure and better revenue generation compared to our peers. In addition, our positive RPU report Our mobile service revenue also to be read in the industry with 6.5%. Increase outperforming our peers and maintaining its growth in for the 22, compared monthly on a year over year basis. And also the upselling result from the 5 gs migration and the increase of the uplift in their mobile consultancy, maintaining and upward and trajectory the quarterly over quarter. In addition, our international moment recovered and the prepared revenue increase continued to ramp up in the 2nd quarter.

Speaker 3

Ideally, our revenue the normal revenue this year, we expect to recover through this pandemic level. In terms of the mobile network quality, we are going to delighted by open signal to Taiwan based over all and 5 gs coverage and fast and overall and the 5 gs experience in June showcasing our performance in network coverage and quality. Turning on to Slide 6, you can find an update to our fixed growth business. We are delighted to see higher service adoption continue to increase by quarter over quarter, driven by our fixed broadband upgrade the promotion package and MOD bundle promotion plans. And MODI, our sign up and service over 300 megabit per second over higher maintenance and its higher growth rate over the 55% year over year, which contributed to 3% and 1% ROI increase overall fixed program revenue ARPU respectively, the fixed program ARPU increased by 15 performance of our customer countries business group.

Speaker 3

On Slide 8, present the performance of our CVG goods. In the Q2, incoming sales tax of the CVG increased by 10.4% year over year. Thanks to the persistent growth of the telecom service as well as the decrease of the manpower expenses and depreciation and expenses. Total revenue of CBG increased by 3.9% year over year, where mobile service revenue decreased by 6.4% on year, compared by the stable 5 gs migration and increase of the postpaid subscriber numbers. In a particularly international roaming revenue continued to recover and the volume contribution brand and deploy both activities.

Speaker 3

The fixed line service revenue 3.9% year over year, 8% year over year, mainly due to the stabilized item supply and increase terminal sales during the quarter. Slide 9. So illustrate our consumer business growth highlights. In the second and fixed broadband and the Wi Fi service. We generated and demonstrate 10.2 quarter over quarter growth.

Speaker 3

On WiFi subscription numbers, they increased by 12 0.5% year over year along with the fixed program and MOD promotion packages. In addition, our video subscription continued its uptrend, increasing the 6.7% on year, mainly driven by our popular OTC brand, Honey Video. So its rich content, including its potential drama correction on professional baseball games. Despite broadcasting of the major sporting program during this quarter, our IPTV brand, MOG, still experienced a slight increase in both subscribers subscription and revenue in the 2nd quarter, followed with its successful upsell on SVOD and channel service brings a word. We are continuing our content strategy to maintain our leading position as the largest video platform in Taiwan.

Speaker 3

Please turn to Slide 10 for overview of our enterprise business performance. In the 2nd quarter, EVG recorded 11.9% year over year, decrease of the income before tax. When we look to the client in the textile business, which had the relative high margin and high level basis of the onetime recognition of the large thermal energy projects on the internal carbon feed. On most of the factory, total result in 1.2%. Year over year, decrease of the total revenue of the EVG in spite of ICT revenue decreased in the 2nd quarter and mobile service revenue increased attributable to the 5 gs ops selling and the recovery of international roaming revenue.

Speaker 3

And sales revenue increased in our subsidiary as well. System line revenues slightly decreased year over year. And then due to the rise tight, also data communication revenue and broadband access revenue continue to close as expected. Slide 11. Last year, clustered our enterprise business timeline In the Q2, in most of our major application demonstrated robust growth on a year over year basis.

Speaker 3

5 gs private network in particular right now after its revenue by so for the interest in project numbers and the current revenue injection. Revenue from data analysis, cybersecurity, IDC and power also achieved year over year growth of 16.7% 17%

Speaker 2

14% 16.6%

Speaker 3

respectively. However, total enterprise margin and application revenue decreased by 2.2% on a year over year basis, mainly due to one time IoT revenue recognized last year, related to small energy projects disposing the one time factor, we continue to see our IoT revenue that develop on trade. In management and enterprise competition revenue was up by 16% to 7% year over year. We continue to invest in developing 5 gs private network, unmanned vehicle and AR personally, we acquired smart code application in Southern Taiwan in the second quarter, leveraging technology to enhance on any of the undersea inspection and to further extend AR technology to tourism and in harbor parks, accepting our leading ICT capabilities and foreseeable revenue contribution. Slide 12 will illustrate on our international business performance.

Speaker 2

In the Q2,

Speaker 3

income before tax of IBG decreased by 6 0.6% year over year due to non operating expenses, such as the foreign currency, the variations and the lost and internal company, Mcfeer, excluding the impact, IBG continuing to experience strong growth in the profit generation at a double digit YOY growth. Capital revenue of IBG increased

Speaker 2

by 23 0.2%

Speaker 3

on yield, mainly driven by the increasing demand for our international private business circuit and closing the emerging business in true IDC and cloud service in several times. For international business expansion, we are glad to share right our sign on MOU with Precision Electricity and also an authority of the Thailand initiated a PE8 in the manned. So a combination of the smart city solution such as the smart code and the smart meters. Now I would like to turn the call over to Vincent for our financial highlights. Thank you, President Li.

Speaker 3

Good afternoon, everyone. I will now walk you through our Q2 financial results. Let's begin with Slide 13, income statement highlights. On the Q2 of 2023, we were glad to see our performance continue to exhibit a growth momentum. Total revenues increased by 2% compared to same quarter last year as a result of growing mobile and broadband service revenues.

Speaker 3

It comes from operations and net income grew by 2% and 2.9% on year, respectively. And such costs were mainly attributable to our strong core business performance. EBITDA maintained quarterly and yearly growth. Overall, in the first half of the year, we delivered impressive operating performance as total revenues increased by 3.8% year over year, driven by strong growth of our mobile, ICT and open services. Non farm operations and net income grew by 3.2% and 4.6% on year, respectively, mainly due to our robust core businesses and growing ICT business.

Speaker 3

Notably, EPS increased by 4.6 percent on year to 2.52%, which hit a 6 year high. EBITDA continued to grow and EBITDA margin continued to stay at above 40%. Now move on to Page 15 for balance sheet highlights. Total assets on June 30, 2023 compared to the end of 2022 grew by 1.3%, mainly due to the increase in other current monetary assets, such as negotiable certificate of deposits. Total liabilities rose by 21%, primarily attributable to the increase in dividends payable, adding debt ratio to increase from 25% to 29%.

Speaker 3

Furthermore, net debt over EBITDA remains 0. Altogether, these debt related figures demonstrate the robustness of our balance sheet. Page 16 provides the summary of our cash flows. Cash flows from operating activities increased by 3.9% on year, mainly due to the decrease in payments to suppliers and maintenance contractors, which offset the impact of rising interest and tax payments. Regarding our capital spending, the amount of cash outflows was about the same compared to the same period last year.

Speaker 3

If we break CapEx into mobile and non mobile components, mobile related CapEx was lowered by 39.5%, whereas non mobile related CapEx increased by 28.9%, and later was primarily attributable to IDC Investments. On top of that, free cash flows grew by 6.9% on year. Taken together, we maintained a robust balance sheet along with strong operating cash flows, which provide a solid foundation for us to be future ready and allow us to remain committed to driving growth and creating long term value for our shareholders. On Slide 17, the take up presents financial results against our financial guidance. In the Q2 of 2023, revenue and all profitability performance measures beat our financial forecast, with income from operations and net income exceeding financial projections by modest margin.

Speaker 3

The quarter net expected performance was mainly driven by the performance of mobile and broadband services and ICT business. In the first half of twenty twenty three, core performance measures topped our financial forecast. Notably, all profit related performance measures were tightened by more than 10% as a result of outperforming core and emerging businesses. That concludes the opening of our Q2 financial results. Let me turn the call over to Chairman

Speaker 2

Our goal is to achieve the reduction of scope 1, scope 2, greenhouse gas provisions by 50% compared to the last 9 year of 2020. Furthermore, we are amount of 12 months in Taiwan to commit to achieving net positive impact on higher diversity and grow net before creation by 2,030. In addition, our ESG practice and achievements have been widely recognized globally. We received an upgraded solidify our position as one of the global lithium companies in sustainable development.

Operator

Thank you, Chairman Guo. Ladies and gentlemen, we will now begin our question and answer session. Ladies and gentlemen, you have seen no further questions.

Speaker 3

I will turn

Operator

it back over to Chairman Guo. Go ahead please.

Speaker 2

Thank you for your participation. Goodbye.

Operator

Thank you, Chairman Guo. And thank you for your participation in Chunghwa Telecom's conference. There will be a webcast replay within an hour. Please visit www.chd.com.qwir

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Earnings Conference Call
Chunghwa Telecom Q2 2023
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