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Chunghwa Telecom Scales a 52-Week High: Time to Buy?

Zacks Equity Research

Shares of Chunghwa Telecom Co., Ltd. CHT, the largest integrated telecom operator in Taiwan, hit a 52-week high of $33.89 on Mar 29. We note that, year to date, the stock has returned nearly 13%.

Chunghwa Telecom reported strong financial results in the fourth quarter of 2015 wherein both earnings and revenues increased on a year-over-year basis.

Recently, the company became the first wireless operator in the country to offer 4G LTE (Long-Term Evolution) service on 2600 MHz band.

In Dec 2015, Chunghwa Telecom won a mobile broadband business license. The operator won 2x30 MHz of spectrum in the 2,500 MHz and 2,600 MHz bands, for a bidding price of TWD 9.955 billion. Notably, the license is valid till Dec 31, 2033. Meanwhile, Chunghwa Telecom has won 2 slots of 1800 MHz spectrums for the installation of 4G LTE wireless network.

Chunghwa Telecom is using the 3-carrier aggregation (3CA) technology which enables the company to offer 4G LTE download speed of a staggering 340 Mbps. The company has a portfolio of 60 MHz of total frequencies in 900 MHz, 1800 MHz and 2600 MHz bands

Notably, the company’s 4G wireless subscriber base stood at 4.43 million, at the end of 2015.  Moreover, Chunghwa Telecom expects to add a net of 2 million 4G wireless subscribers in 2016.

In addition to its wireless efforts, Chunghwa Telecom is gradually expanding its subscriber base on the back of high-speed next-generation FTTx (fiber to the home/building/premise) offerings. The company is investing heavily to build a formidable FTTx network in Taiwan. In this regard, collaboration with Alcatel-Lucent to bring G.Fast ultra-broadband access technology in Taiwan is a huge positive.

Moreover, Chunghwa Telecom continues to witness significant subscriber growth for its mobile Internet services on rising demand for 3G mobile broadband and smartphones in Taiwan. At the end of 2015, mobile subscriber base totaled 11.18 million, up 0.5% year over year while mobile Internet subscriber base was 5.97 million, up 15.7% year over year.

However, disappointing guidance for certain important metrics for full-year 2016, an oversaturated Taiwanese telecom market, increased competition and reduced mobile interconnection rate are some of the factors that may hamper the company’s performance.

Zacks Rank & Stocks to Consider

Chunghwa Telecom currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include NTT DOCOMO, Inc. DCM, Fairpoint Communications, Inc. FRP and Orange ORAN. All the three stocks hold a Zacks Rank #2 (Buy).

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CHUNGHWA TELECM (CHT): Free Stock Analysis Report
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