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Chunghwa Telecom (CHT) Q4 Earnings & Revenues Fall Y/Y

Zacks Equity Research

Chunghwa Telecom Co. Ltd. CHT announced disappointing financial results in the fourth quarter of 2016. Quarterly total revenue was at approximately $1,834 million, down 3.7% year over year. Fourth-quarter net income came in at around $243 million, down 12.3% year over year.  Net earnings per American Depository Share (ADS) were 31 cents, down 16.2% year over year.

Operating income was $311 million, down 12.7% year over year. Operating costs decreased 5.7% year over year to $1,506.6 million. Operating margin declined 17% from 18.2% in the year-ago quarter.

The fourth quarter of 2016 EBITDA was $566.5 million, down 7.9% year over year. Quarterly EBITDA margin came in at 35%, down from 36.2% in the prior-year quarter. During the reported quarter, Chunghwa generated around $1,053.5 million of cash from operations, up 15.7% year over year. Cash and cash equivalents as of 2016 increased 6% year-over-year to $1,007.6 million.

Chunghwa is the largest telecom operator in Taiwan. In future, management expects to enter into the mainland China telecom market where it will face intense competition from China Mobile Ltd. CHL, China Unicom (Hong Kong) Ltd. CHU and China Telecom Corp. Ltd. CHA. Chunghwa Telecom currently carries a Zacks Rank #5 (Strong Sell).

Segment-wise Revenues

The Mobile Communications segment accounted for approximately $891.4 million of the total fourth-quarter 2016 revenues, down 8.7% year over year. The Internet segment contributed around $239 million, increasing 9.4%. The Domestic Fixed-line Communications segment recorded $557.7 million in revenues, down 8.1%. The International Fixed-line Communications segment generated $108.3 million, down 8.8%. Other Business registered the remaining $35.8 million, down 43.2%.

In the fourth quarter of 2016, Mobile VAS (value added services) revenues grossed approximately $328.8 million, up 3.4% year over year, wherein mobile Internet VAS (largest contributor) revenues increased 4.8% year over year.  Mobile voice revenues were decreased 12.3% to $279.5 million. Smart device sales revenues slumped 17.6% to $273.8 million.

Subscriber Statistics as of Dec 31, 2016

The total broadband subscriber base was over 4.473 million, out of which the FTTx subscriber base was around 3.48 million, accounting for 77.8% of the total broadband subscriber base. Over 1.14 million broadband subscribers signed up for 100 Mbps or higher speed connections, up 11.1% year over year.  HiNet subscriber base totaled 3.76 million.

Mobile subscriber base was 10.79 million, down 3.5% year over year. Mobile Internet subscriber base was 6.85 million, up 14.8% year over year. 4G wireless subscribers base stands at 6.71 million. The International/Domestic Fixed-line subscriber base was 10.94 million.

Guidance

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.

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

 

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

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