Chunghwa Telecom Q2 Earnings Improve Y/Y, Revenues Fall

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Chunghwa Telecom Co. Ltd. CHT declared mixed financial results in the second quarter of 2015. Quarterly total revenue came in at approximately $1,844.2 million, down 0.8% year over year. The second-quarter 2015 net income came in at around $306.6 million, up 5.1% year over year. Net earnings per ADR were 47 cents as against 46 cents in the year-ago quarter.

Quarterly operating income stood at $426.7 million, up 6.8% year over year. Quarterly operating costs were $1,416.2 million, up 0.6% year over year. Operating margin was 23.1% compared with 22.1% in the year-ago quarter.

Second-quarter 2015 EBITDA was $698.9 million, up 3.4% year over year. Quarterly EBITDA margin came in at 37.9% against 37.4% in the prior-year quarter. During the reported quarter, Chunghwa generated around $589.7 million of cash from operations, up 26.2% year over year. Capital expenditure was around $155.2 million, down 34.6% year over year.

Segment wise Revenues

The Mobile Communications segment accounted for approximately $923.7 million of the total second-quarter 2015 revenue, up 2.6% year over year. The Internet segment contributed around $204.8 million, up 0.4% year over year. The Domestic Fixed-line Communications segment recorded $575.4 million in revenues, up 3.1% year over year. The International Fixed-line Communications segment generated $118.9 million, down 6.6% year over year. Other Business registered the remaining $20.3 million, up 21.1% year over year.

In the second quarter of 2015, Mobile VAS (value added services) revenues were $319.5 million, up 16.8% year over year, wherein mobile Internet VAS (largest contributor) revenues were up 22.6% year over year. Broadband access revenues increased 2% year-over-year to $155.2 million.

Subscriber Statistics as of Jun 30, 2015

The total Broadband subscriber base was nearly 4.52 million, out of which the FTTx subscriber base was around 3.24 million, accounting for 71.7% of the total broadband subscriber base. 985,000 Broadband subscribers signed up for 100 Mbps or higher speed connections, up a whopping 57.2% year over year. HiNet subscriber base totaled 3.78 million.

Mobile subscriber base stood at 11.15 million, up 2.1% year over year. Mobile Internet subscriber base was 5.54 million, up 19.2% year over year. Chunghwa currently commands 25% of the mobile Internet market in Taiwan. The International /Domestic Fixed-line subscriber base stood at 11.27 million.

Guidance

For fiscal 2015, the company expects total revenue to increase 2% year-over-year to NT$231.09 billion. Operating costs are expected to increase 1.9% compared with the prior year period. Income from operations is expected to be NT$45.05 billion. Non-operating income is estimated at NT$0.87 billion. Income before income tax and net income are expected to be NT$45.92 billion and NT$37.50 billion, respectively. Earnings per share are expected to be NT$4.83. Capital expenditure is expected to decline 5.7% year over year.

Stocks to Consider

Currently, Chunghwa carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space are Nippon Telegraph and Telephone Corp. NTT, NTT DoCoMo Inc. DCM and Cincinnati Bell Inc. CBB. All three stocks sport a Zacks Rank#1 (Strong Buy).

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