Chunghwa Telecom Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2026

Key Takeaways

  • Positive Sentiment: Consolidated revenue reached TWD 59.99 billion (+7.5% YoY), a first-quarter record, with EPS of TWD 1.30, EBITDA of TWD 23.3 billion (38.85% margin) and management saying all key metrics beat guidance.
  • Positive Sentiment: The ICT business is a major growth driver—group ICT revenue rose 25% YoY, recurring ICT +11%, with IDC +29%, Cloud +43%, AIoT +26% and a record ICT order intake of TWD 20 billion.
  • Positive Sentiment: Consumer network traction remains strong—mobile revenue share hit a historic 41.1%, 5G subscriber share 39.4% (5G penetration ~48% of smartphones), and fixed broadband ARPU rose to TWD 818, supporting ongoing service revenue growth.
  • Positive Sentiment: Company is scaling AI and network investments—rolling out 5G SA for select verticals, launching the homegrown CHT AI Factory and monetizing AI data-center services, while expanding submarine cable capacity by 18 Tbps to bolster international connectivity.
  • Neutral Sentiment: 2025 cash dividend set at TWD 5.2 per share with a payout ratio of 104.2%, signaling strong shareholder returns but a payout above 100% that investors may watch for sustainability.
AI Generated. May Contain Errors.
Earnings Conference Call
Chunghwa Telecom Q1 2026
00:00 / 00:00

There are 4 speakers on the call.

Speaker 2

Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom conference call for the company's first quarter 2026 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 question and answer session. For your information, this conference call is now being broadcasted live over the internet. Webcast replay will be available within an hour after the conference is finished. Please visit the CHT IR website, www.cht.com.tw/ir under the IR calendar section. Now, I would like to turn it over to Miss Angela Tsai, the Vice President of Finance. Thank you. Miss Tsai, please go ahead.

Operator

Thank you. I'm Angela Tsai, vice president of finance, Chunghwa Telecom. Welcome to our first quarter 2026 earnings conference call. Joining me today are Chunghwa's President, Rong-Shy Lin, and our Chief Financial Officer, Ao-Chi Shih. During today's call, management will begin by sharing our recent strategic achievements and providing an overview of our first quarter business results. This will be followed by a discussion of our segment performance and financial highlights. We will then open the floor for questions and answers. Please turn to slide 2 to review our disclaimers and forward-looking statement disclosures. Without further delay, I will turn the call over to our President. President Lin, please go ahead.

Speaker 3

Thank you, Angela. Hello everyone. Welcome to our first quarter 2026 result conference call. To begin, we are pleased to announce that our 2025 cash dividend per share is set to TWD 5.2, with a payout ratio of 104.2%, reflecting both our confidence in operation performance and a commitment to shareholders. For 2026, we are glad to see strong financial performance of the first quarter with all metrics exceeding quarterly guidance. Our revenue for this first quarter hit a record high for any first quarter since 2012, mainly driven by outstanding ICT revenue growth. In addition to our strong mobile and fixed line performance, our operation income, net income, and EPS in the first quarter further elevated on a healthy upward trajectory. This represents a very positive start to the year.

Speaker 3

Given the steady business growth in 2026, we plan to further deploy resources for the capturing pre 6G and AI-related opportunity. In the mobile front, we will continue our gradual construction of 5G standalone network. The SA deployment in our plan is a necessity to transition to 6G and will be progressively roll out in phases. Based on demand, certain select verticals such as unmanned vehicle and autonomous driving are using SA network. In addition, we are expanding SA deployment to high traffic areas to support commercial demands and events like exhibitions, sport games, and art performances. Another important development in 2026 is the utilization of agentic AI. Building on the generative AI catalyst initiatives launched internally in 2025, we further expanded the use of agentic AI to enhance operational workload and upgrade our service offering.

Speaker 3

From a revenue perspective, we continue to monetize our AI infrastructure, delivering solid revenue growth, particularly driven by AI data center. On the technology front, we would like to highlight our self-developed CHT AI factory platform by integrating full-stack solutions, compute power, and a portfolio for AI module, models and agents. The platform not just supports the development of our own enterprise copilots through various AI agent, but also enable us to offer AI-enabled applications to enterprise customer, including smart home ecosystem and smart manufacturing in 2026. We remain confident in the growth potential of this AI-enabled solution. Finally, in the first quarter, alongside our technological leadership, we remain equally dedicated to setting new global ESG benchmarks. We retained our MSCI ESG rating of triple A in 2026, underscoring our position as the top-tier telecom with the highest scores among global peers by April.

Speaker 3

In February, one year ahead of regulators re-requirement, we successfully became the first in Taiwan to file a group-based, sustainability-related financial information of 2025, fully compliant to IFRS Standard 1 and Standard 2, representing our transparent ESG financial disclosure. At the forefront of the industry, we ranked in the top 5% of the S&P Global Sustainability Yearbook for the fourth consecutive year, and maintain our position in the Dow Jones Best in Class award and emerging market indices. We secure our third consecutive A ranking from the CDP survey, maintaining the Taiwan leadership position. Let's move on to our first quarter 2026 result. Please turn to page 5 for our success in Taiwan's mobile market. We continued our market share leadership in Taiwan's mobile market.

Speaker 3

According to data from our telecom regulator, our mobile revenue market share rose to 41.1%, a historic high. While our subscriber share among peers climbed to 39.7%, mainly driven by the continuing growth in the postpaid subscribers and the strong roaming performance in the quarter. Our 5G performance was equally impressive. Based on regulators' data, our 5G subscriber market share was up to 39.4%, maintaining our industry-leading position. The 5G penetration rate among our smartphone users further increased to near 48% by this March, while the average month fee uplifted from 5G migration slightly decreased to 36% due to a one-time factor.

Speaker 3

With the combined strength of our expanding subscriber base and the growing 5G adoption, our mobile service revenue growth outpaced the industry, achieving an exciting 4.4% increase year-over-year. Postpaid ARPU are also grew by 3.6%, TWD 20 on a year-over-year basis. We expect this positive trajectory to continue, supported by Taiwan's favorable mobile market landscape. Let's move on to slide 6 for our fixed broadband business update. In the first quarter, we are glad to see the number of subscribers adopting service speed of 300 megabits per second and above reached 40% of our total fixed broadband subscriber base, which is encouraging.

Speaker 3

As a result, our fixed broadband revenue in the first quarter caused a 3% increase year-over-year, while the ARPU obtained a year-over-year raise of NTD 20 to NTD 818 per month. Fixed broadband subscribers delivered positive growth year-over-year. Going forward, we will continue to promote high-speed services such as 500 Mbps and 1 Gbps, and above to further enhance our customer profile and gain incremental ARPU. Page 7 highlights the performance of our million subscriber consumer services. The first growth driver was our multiple play offering, which integrates mobile, fixed broadband, and Wi-Fi services. Subscription surpassed the milestone of 1 million in the first quarter, representing a 15% year-over-year growth.

Speaker 3

Notably, our Wi-Fi penetration among fixed broadband subscriber reached 55%, reflecting our significantly enhanced in-home coverage, anchoring customer loyalty, and driving sustained ARPU expansion. The most encouraging performance was recorded in our video business. Thanks to the excitement around the 2026 World Baseball Classic. In the first quarter, total video subscribers, including MOD and Hami Video, recorded a 6% quarter-over-quarter increase, successfully exceeding 3 million subscribers. Meanwhile, Hami Video ARPU also demonstrated encouraging double-digit growth year-over-year. Looking ahead, as we are preparing for the upcoming FIFA World Cup in the second quarter and the Asian Games in the third quarter, we plan to leverage long-term subscription offering and sustain user engagement across consecutive major sports events throughout the year. Lastly, our digital service delivered 2 additional million subscriber milestone.

Speaker 3

The subscriber number of our consumer cybersecurity services maintained above 1 million during the quarter, while the number of transaction users of our DCB services also exceeded the 1 million threshold during the same period, reflecting the sustainable growth momentum of our digital ecosystem. Slide 6 illustrates the key development in our enterprise ICT business. With the group collaboration, our group's ICT revenue in the first quarter increased 25% on year due to continued expansion of the emerging services. Recurring ICT revenue also grew by 11%, maintaining strong growth momentum across all major services line, particularly cybersecurity, IDC, and international public cloud services. Among our core ICT services pillars, IDC, cloud, and AIoT continue to be the key growth drivers, posting year-over-year growth of 29%, 43%, and 26% respectively.

Speaker 3

IDC revenue was mainly driven by the installation projects from manufacturing company. Cloud revenue received contributions from government taxation projects, and the smart environment solutions continue to support AIoT revenue growth. In addition, on a year-over-year basis, our big data service revenue grew by 8%, and the 5G private network services revenue surged, both thanks to project revenue recognition from both domestic and international public sectors. However, revenue from cybersecurity services declined due to the high comparison base last year. We are even more proud to share that our ICT order intake in the first quarter recorded a new high with counter value amounting to TWD 20 billion, mainly representing opportunities from network resilience project and the large follow-on project on national fishery and surveillance system.

Speaker 3

Notably, the value of the smart surveillance project obtained exceeded TWD 1 billion, underscoring our number 1 market leadership position in surveillance services. In addition, our homegrown AI traffic flow identification and analysis technologies continued to win us smart transportation projects, while our subsidiary, Next Bank also worked with us to leverage our telecom data on loan decisions. Both represent replicable solution for more future projects in specific verticals. Slide 9 highlights the robust performance of our international subsidiaries. In the first quarter, international subsidiary revenue grew 20% year-over-year, mainly driven by major ICT project delivers across the U.S. and the Southeast Asia market. Especially, U.S. revenue surged 89% year-over-year, driven by successful revenue recognition of large-scale AI supply chain projects.

Speaker 3

While Southeast Asia revenue increased 16% year-over-year due to contribution from a phase construction project at a key customer facility in Singapore. We continue to secure large-scale project contracts in the U.S. while extending this proven expertise into Southeast Asia. Starting from this quarter, we are pleased to report our financial return from network resilience deployment. In the first quarter, our satellite service revenue increased 16% year-over-year, stemming from our satellite connectivity solution across multiple sectors, including government, multinational enterprise, high-tech, and offshore energy industry. Additionally, revenue of international private leased line lease circuit or IPLC rose 6% year-over-year, mainly driven by the recurring revenue contribution from our SDH 2 and Africa submarine cables starting from the previous quarter.

Speaker 3

Excitingly, to meet surging connectivity demands, we expanded the capacity of APCN submarine cables by additional 18 terabits per second, spanning routes from Taiwan to Japan and Taiwan to Singapore. The expansion is expected to support medium to long-term bandwidth demands across Asia and serve as a key driver of long-term revenue growth. Now let's move on to page 10 for the financial performance of our three business groups. In the first quarter, thanks to steady revenue growth in the mobile and fixed broadband services, plus higher sales revenue driven by the strong iPhone demand. Our consumer business group delivered a robust 6.2% year-over-year revenue increase and a solid 5.3% year-over-year income before tax increase, boldly underpins the group's outperformance.

Speaker 3

For enterprise business group, its revenue rose by 8.5% year-over-year, driven by strong ICT business and the growth in mobile and the fixed broadband services. However, his income before tax dropped by 2.7%, mainly due to fixed voice service decrease, which offsets the growth in ICT business as mentioned earlier. For international business group, both of his revenue and income before tax grew positively by 10.7% and 1.6% respectively, driven by the rising ICT service demand from the overseas AI supply chain, together with stronger roaming performance. That concludes the business overview of the first quarter. Now I would like to hand the call over to Audrey for the financial update.

Speaker 1

Thank you, President. Good afternoon, everyone, and thank you for joining us today. I'm pleased to walk you through our financial performance for the first quarter of 2026. Please turn to slide 12. We reported consolidated revenue of TWD 59.99 billion this quarter. This represent a 7.5% year-over-year increase. It is also a record high for the first quarter. This growth was driven by three key factors. First, our ICT business delivered strong momentum. This was supported by integrated projects, IDC and cloud demand, and AIoT expansion. Second, sales revenue was very strong. This was mainly driven by handset demand at both the parent company and our subsidiaries and now. Also, our subsidiary, Chunghwa Precision Test Tech, also contributes meaningfully. Third, our core telecom business remains stable. We saw steady growth in mobile, broadband, and data service.

Speaker 1

Income from operations increased by 4.6%. This growth was supported by the sustained profitability of our core telecom business, as well as strong earnings contribution from our subsidiaries. In addition, the recognition of a higher value integrated projects together with the continued scaling of our IDC and cloud operations further improve our operating margins and overall earnings quality. As a result, earnings per share increased from TWD 1.26 to TWD 1.3, reflecting our consistent profitability and making the highest first quarter EPS in the past 10 years. EBITDA for the quarter remained stable at TWD 23.3 billion, with a healthy EBITDA margin of 38.85%. In summary, these results reflect high quality earnings growth across our business segments. Now please turn to slide 13 as we move on to our balance sheet highlights.

Speaker 1

Total assets increased by 2.3% year-to-date, primarily driven by a rise in current assets. This was led by an increase in time deposit and NCDs, along with seasonal increases in prepaid expenses, inventories, and accounts receivable to support our business operation. Additionally, investment properties rose following the completion of a new rental site, while the net decrease in PPE reflects depreciation charges for the period. On the liability side, total obligations increased by 1.1% compared with year-end 2025. The increase was mainly attributable to a higher bonds payable, driven by the issuance of convertible bonds by our subsidiary, Chunghwa Precision Test Tech. Aside from this, our liability structure remains stable. Our financial strength is further reflected in our key ratios. The debt ratio improved to 24.92%, while the current ratio remained healthy and well above 100%.

Speaker 1

Most notably, our net debt to EBITDA ratio stood at zero, highlight our solid financial position. Now let's move to slide 14 for our cash flow summary, where we will review our performance for the first quarter of 2026. Net cash provided by operating activities remained healthy in the first quarter. Year-over-year changes in operating cash flow were mainly driven by working capital movements. Lower cash inflows from accounts receivable were largely offset by reduced cash outflows from accounts payable. Additionally, we saw an increase in cash outflows related to inventory movements, reflecting our efforts to support upcoming business expansions. On the investment side, CapEx total TWD 4.55 billion represent a planned year-over-year decrease of 15.9%.

Speaker 1

Mobile CapEx declined by 24.4%, in line with our strategy to gradually reduce capital intensity as we move beyond the peak of the 5G deployment cycle. Non-mobile CapEx decreased by 12.8%, mainly reflecting a higher base in the previous year. As a result, free cash flow reached TWD 6.65 billion. Despite modest year-over-year fluctuations, our cash position remained very solid. Our recurring cash generation continues to comfortably support

Operator

Both business expansion and shareholder returns. Turning to slide 15 for our performance highlights relative to guidance. In the 1st quarter of 2026, we delivered strong results with revenue exceeding our guidance. This performance was supported by continued growth in our ICT business, stable contribution from our core telecom operations, and stronger than expected sales revenue. Most importantly, revenue growth continued to outpace the increase in operating expenses, reflecting improved operating efficiency and disciplined cost management. While certain project-related costs increased alongside higher ICT revenue recognition, overall cost control remained well within expectations. As a result, all key profitability metrics, including operating income, net income, EPS, and EBITDA, came in above expectations for the quarter. This concludes our financial results highlight. Thank you for joining us today, and we will now open the call for questions.

Speaker 2

Yes, thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question for any of today's speakers, please press star key and 1 on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. When you are speaking, please be louder or closer to the microphone. If you find that your question has been answered before it is your turn to speak, please press star key and 2 to cancel the question. You are also welcome to send questions via chat box on the webcast page. We will begin with the questions from telephone line and then move to the queries from the webpage. Thank you. Now please press star 1 on your telephone keypad if you would like to ask the question. Thank you.

Speaker 2

To ask a question, you may press star one on your telephone keypad. Thank you. You may press star key and number one on your telephone keypad if you would like to ask the question. Thank you.

Operator

Okay, we got a question from our platform. That's, how sustainable is the ICT business? What is the outlook for the rest of the 2026 and beyond? What is the impact of AI on the IT services industry? Okay. I mean, for the ICT business for the year 2026, I think, actually, we think, we remain confident and positive for the outlook of our overall ICT business. It is because the organic growth from the ICT services and the IT, sorry, then the AI contribution and AI, you know, the value creation.

Operator

As you know, for most of the digital services we provide for the consumers or for the enterprise sectors, actually, in this year, we introduced the agentic AI, which can also help to upgrade some services, you know, to meet or cater to the enterprise's customers' requirements. I think, for this part, it also can contribute some revenue to the ICT business. In terms of the impact of AI on the IT services, I think, for this part, the major impact came for the enterprise or enterprise sectors. Just like I said, we think that we can introduce AI to enhance the services and provide value and bring in the revenues for our, you know, overall, you know, revenue growth.

Speaker 2

If you would like to ask the question, you may press star one on your telephone keypad. Thank you.

Operator

There's a second question from HSBC. You had guided for a higher in non-mobile CapEx for 2026 estimation. Could you please elaborate on that? Could you get an underlying trend within the non-mobile CapEx guidance? For the non-mobile CapEx for 2026 estimates, that's because we have some CapEx increase in the IDC construction for IDC constructions. In 2026, we have some AIDC construction in our pipeline. We allocate some CapEx for the construction. We also continue to, just like our President reported earlier during the result call, we continue to invest in the construction of undersea cable to enhance our network resilience.

Operator

The undersea cable, you know, also continue to contribute to our, you know, total revenue for these years. That's why we raised our non-mobile CapEx for year 2026. Yeah.

Speaker 1

Okay. I can also add on for the two previous question. The first question is about that the whole sustainable of the ICT. I think that I just want to provide some overview that because due to the digital transformation demand in the industry, we did see that the ICT demand is quite sustainable. This is for the first part for the question. The second part for the non-mobile related CapEx. Non-mobile related CapEx in fact, it basically include from fixed line, satellite, IDC, AIDC, PSP, IN. Overall, there are three focus. The main focus is on resilience and lifecycle management. We need to make sure that the core network can ensure security and resilience.

Speaker 1

The second part is that we also, there is some necessary investment to strengthen critical infrastructure defense. Finally, we need to make sure we also expand our signaling and user capacity to meet the 2026 business plan demand for AIoT and 5G traffic. This also include in some of the, I say, functionality in the select area to future-proof the network. These are our non mobile related CapEx. Compared to last year, because last year we have a high basis, you could see the slight decrease of non-mobile CapEx in this quarter.

Speaker 2

We are now in question and answer session. If you would like to ask the question, you may press star one on your telephone keypad. Thank you. If you would like to ask the question, you may press star one on your telephone keypad. Thank you. Thank you for all your questions. If there are no further questions, I will turn it back over to President Lin. Thank you.

Speaker 3

Thank you very much for your participation. See you. Bye-bye.

Speaker 2

Yes. Thank you, President Lin. Ladies and gentlemen, we thank you for your participation in Chunghwa Telecom's conference. There will be a webcast replay within an hour. Please visit www.cht.com.tw/ir under the IR Calendar section. You may now disconnect. Thank you again. Goodbye.

Powered by Quartr