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Chunghwa Telecom Co., Ltd. (CHT) Q4 2023 Earnings Call Transcript

Chunghwa Telecom Co., Ltd. (CHT)

Q4 2023 Earnings Conference Call

Company Participants

Angela Tsai - Director of Investor Relations

Harrison Kuo - Chairman

Ivan Lin - President

Vincent Chen - Chief Financial Officer

Conference Call Participants

Neale Anderson - HSBC

Sara Wang - UBS

Rajesh Panjwani - JPMorgan

Presentation

Operator

Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the company's Fourth Quarter 2023 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 CHT IR website www.cht.com.tw/ir under the IR calendar section.

And now, I would like to turn it over to Ms. Angela Tsai, the Director of Investor Relations. Thank you. Ms. Tsai, please go ahead.

Angela Tsai

Thank you. I'm Angela Tsai, Assistant Vice President of Financial Department for Chunghwa Telecom. Welcome to our fourth quarter 2023 results conference call.

Joining me on the call today are our Chairman, Harrison Kuo; our President, Ivan Lin; and Vincent Chen, our Chief Financial Officer.

During today's call, management will begin by providing the Chairman's message, our business overview, a discussion of our segment performance and the financial results, followed by management guidance for 2024. After, we will move on to the question-and-answer portion of the call. On Slide 2, please read our disclaimers and notes concerning forward-looking statements.

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

Harrison Kuo

Thank you, Angela, and hello, everyone. Welcome to our fourth quarter results conference call. And I would like to begin with our strong financial performance for 2023.

We concluded 2023 with an EPS of NT$4.76, while both revenue and EPS exceeded the high end of our full year guidance and hit six-year highs. We are proud to beat the full year guidance and also commit to investors to give all-out efforts for this year.

During the fourth quarter of last year, Taiwan's telecom industry entered a new three-player landscape, where Chunghwa Telecom continues to be the largest telco, followed by the other two players. Our market cap represents 60% of the industry market value. Our revenue share in Taiwan mobile market also exceeded 40%. In addition, we have the most 5G subscribers in Taiwan, with more than 3 million, not to mention, the overall mobile subscriber number.

All the stats highlight that our leading position far outweighs our peers. At the same time, we are happy to see the domestic industry evolution, and believe that under the current structure, value creation for customers will continue to remain the industry focus and the digital transformation will continue to develop and serve as one of the key strong growth drivers.

Keeping our #1 position, we reiterate our confidence in widening our leading against the peers due to our solid strengths and growth momentum. In 2023, our mobile postpaid subscriber numbers continued its year-over-year growth throughout the whole year despite the total number of mobile SIMs in Taiwan decreased in 2023. We also achieved the highest mobile service revenue in the industry.

Our success in attracting subscribers speaks for our network strengths, including the most extensive mobile coverage, largest capacity and fastest speeds, supported by our most numerous number -- mobile base station already in use. We believe our mobile subscriber gains and revenue growth in 2023 will continue and roll over to 2024.

Our competitive advantage also come from our cross-sector business wins, including our growing fixed broadband business, accelerating technology momentum -- monetization and the ongoing investment in content and digital ecosystems. With our continuous efforts and the business development, we maintain optimistic about positive outlook for the next year ahead.

Last, I am pleased to share that we are establishing a subsidiary in Germany in the first half of 2024, which will serve as the forerunner for International Business expansion in Europe. This marks a meaningful milestone of our international expansion.

Now, let me hand the call over to Ivan for the business update of the fourth quarter of 2023.

Ivan Lin

Thank you, Chairman Kuo, and hello, everyone.

Now, please flip to Page 5 for an update on our outperformance in the mobile service. As of November 2023, we maintained our leading position in Taiwan's mobile market with the largest subscriber share of 37.1%. Meanwhile, we were excited to see our revenue share reach a remarkable milestone, [exceeding] (ph) 40% in the third quarter and hitting 40.2% by the end of last November, further widening our lead against our peers. Our excess revenue share over subscriber share increased to 3.1%, [which] (ph) is encouraging.

In addition, our mobile service revenue in fourth quarter recorded 5.8% year-over-year increase, maintaining its growth for 33 consecutive months. While our postpaid ARPU report 4.3% year-over-year increase, continuing this consecutive growth for 11th quarter. This increase was mainly owned to the 5G migration upsells, international roaming recovery and the increase of the postpaid subscriber numbers.

Thanks to 5G adoption, we see the average monthly fee uplift from customer who migrate from 4G to 5G increase to 49% in the fourth quarter, further from the 44% in the third quarter, maintaining an [inspiring upward] (ph) trajectory. Going forward, we expect the overall 5G penetration in Taiwan will continue to steadily develop in 2024. We believe that Chunghwa will benefit the most, given our #1 position in the best 5G quality ranked by the well-known international institutes.

Let's move on to Slide 6 for update in our fixed broadband business. In the fourth quarter, we are glad to see a positive performance in the fixed broadband sector, as the revenue and ARPU increased by 2.6% and 1.1%, respectively, on a year-over-year basis, mainly attributed to the increased higher-speed migration.

Our sing-ups for service of the 300 megabit per second or higher continue to be popular among all speed mix since the second quarter of 2023, with a year-over-year growth in the fourth quarter achieved 32%, maintaining double-digital growth. It's worth noting that our speed profile optimization promoted by the market incentives also worked in upgrading speeds from the below the 100 megabit per second to transition to higher speed above the 100 megabit per second. We see the 12% year-over-year increase in sign-ups for service at 100 megabit per second or higher. As the optimization strategy will go on in 2024, we are confidently seeing the upward trend of the fixed broadband ARPU continue going forward....

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