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Chunghwa Telecom (CHT) Q2 Earnings and Revenues Drop Y/Y

Zacks Equity Research

Chunghwa Telecom Co. Ltd. CHT announced disappointing financial results in the second quarter of 2017. Quarterly total revenue was approximately $1,840 million, down 0.9% year over year. Second-quarter net income came in at around $345 million, down 5.6% year over year. However, net earnings per American Depository Share (ADS) were 45 cents, up 2.3% from the year-ago quarter.

Operating income was approximately $407.8 million, down 4.3% year over year while operating costs increased 0.1% to around $1,434.9 million. Operating margin declined 22.1% from 22.9% in the year-ago quarter.

The second quarter of 2017 EBITDA was $673.6 million, down 3.1% year over year. Quarterly EBITDA margin came in at 36.5%, down from 37.5% in the prior-year quarter. In the reported quarter, Chunghwa generated around $527.6 million of cash from operations, up 18.9% year over year. Cash and cash equivalents as of Jun 30, 2017 increased 8.3% to about $1,600 million.

Chunghwa is the largest telecom operator in Taiwan. Management expects to enter the mainland China telecom market in the future, where it will face intense competition from China Mobile Ltd. CHL, China Unicom (Hong Kong) Ltd. CHU and China Telecom Corp. Ltd. CHA. Chunghwa currently carries a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Segment-wise Revenues

The Mobile Communications segment accounted for approximately $886.7 million of the total revenue in second-quarter 2017, up 1.2% year over year. The Internet segment contributed around $234.3 million, increasing 4.4%. The Domestic Fixed-line Communications segment recorded $562.4 million in revenues, down 7.4%. The International Fixed-line Communications segment generated $122.1 million, up 0.9%. Other Business registered the remaining $37.1 million, up 6.3%.

Subscriber Statistics

As of Jun 30, 2017, total broadband subscriber base was over 4.48 million, of which FTTx subscriber base accounted for 78.8%, with around 3.53 million subscribers. Broadband subscribers signing up for 100 Mbps or higher speed connections were over 1.23 million, up 10% year over year.  HiNet subscriber base totaled 3.75 million, down 0.4% year over year. Mobile subscriber base was 10.72 million, down 1.4% year over year. Mobile internet subscriber base was 7.23 million, up 12.4% year over year. 4G wireless subscribers base stands at 7.56 million. The International /Domestic Fixed-line subscriber base was 10.83 million.

Chunghwa Telecom Co., Ltd. Price, Consensus and EPS Surprise


Chunghwa Telecom Co., Ltd. Price, Consensus and EPS Surprise | Chunghwa Telecom Co., Ltd. Quote


For 2017, Chunghwa expects total revenue to increase 0.5% year over year to NT$231.16 billion. Operating costs are expected to increase 2.8% to NT$186.46. Income from operations is expected to be NT$44.66 billion, down 7.1% year over year. Non-operating income is estimated at NT$1.03 billion, reflecting a substantial 19.8% decline from 2016. Income before income tax and net income are expected to be NT$45.69 billion (down 7.4%) and NT$36.89 billion (down 7.8%), respectively. Earnings per share are expected to be NT$4.75. EBITDA is projected at NT$ 77.91 billion, down 3.3%. Capital expenditure is expected to rise a substantial 29% year over year to NT$30.28 billion.

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