Chunghwa Telecom Co Ltd (NYSE:CHT) This autumn 2022 Earnings Convention Name February 2, 2023 2:00 AM ET
Firm Contributors
Angela Tsai – Senior Director, Investor & Media Relations
Harrison Kuo – President & Director
Vincent Chen – Senior EVP, Finance & CFO
Convention Name Contributors
Neale Anderson – HSBC
Sara Wang – UBS
Operator
Good afternoon, women and gents. Welcome to Chunghwa Telecom convention name for the corporate’s fourth quarter 2022 working outcomes. [Operator Instructions]. In your data, this convention name is now being broadcasted dwell over the Web. Webcast replay can be accessible inside an hour after the convention is completed. Please go to CHT IR web site, www.cht.com.tw/ir below the IR Calendar part.
And now I want to flip it over to Ms. Angela Tsai, the Director of Investor Relations. Ms. Tsai, please go forward.
Angela Tsai
Thanks. That is Angela Tsai, Director of Investor Relations for Chunghwa Telecom. Welcome to our Fourth Quarter 2022 Outcomes Convention Name. Becoming a member of me on the decision in the present day are Harrison Kuo, our President; and Vincent Chen, our Chief Monetary Officer.
Throughout in the present day’s name, administration will start by offering an outline of our enterprise within the fourth quarter, adopted by a dialogue of our section efficiency and the monetary highlights. After, we are going to transfer on to the question-and-answer portion of the decision. I would wish to please observe our secure harbor statements.
Now I’ll flip the decision over to President, Kuo. President, Kuo, please go forward.
Harrison Kuo
Thanks, Angela, and good day, everybody. Welcome to our Fourth Quarter Outcomes Convention Name. To start, we want to ship our greatest needs to our friends as their merger plans had been authorised by the NCC in January. We imagine the ensuing change of the market panorama is constructive to the telecom trade in Taiwan because the well being of the market improvement for the energy and the general 5G adoption in Taiwan may constantly preserve its steady progress.
Underneath the brand new panorama, we are going to proceed our deal with constructing ecosystems and creating long-term worth for patrons. Because the market chief by way of community high quality, service high quality and the subscriber quantity in Taiwan, we’re assured in remaining forward of our friends in all these facets going ahead.
Now let’s flip to Web page 4 for an replace on our efficiency within the fourth quarter. Within the fourth quarter, our cellular income share and subscriber share climbed to 39.5% and 36.6%, respectively, attaining one other strong interval of progress on each year-over-year and quarter-over-quarter foundation. As well as, the year-over-year improve of each income share and subscriber share additionally progressed within the consecutive quarter, affirming our sturdy main positions in Taiwan’s cellular markets, subtend by our notable progress momentum.
Please flip to Slide 5 for a more in-depth look and our cellular enterprise. Within the fourth quarter, our whole cellular service income was up by 5.8% year-over-year, sustaining its year-over-year progress for 20 consecutive months, attributable to the upsale ensuing from 5G migration and outperforming subscriber quantity improve. As of penetrations progressed, we absorbed a median 41% uplift in cellular month-to-month charges, attributable to shoppers who migrate from 4G to 5G. As well as, we’re delighted to see the rise of roaming income and the pay as you go income throughout the quarter. The mobilized cross-border actions additionally contributed to the rise of pay as you go subscriber numbers.
Along with sturdy progress of postpaid subscriber numbers in addition to the bottom of churn fee amongst our friends, our whole cellular subscriber numbers, excluding IoT SIMs elevated by 3.5% year-over-year. On the whole, our postpaid ARPU achieved 3.3% year-over-year progress within the fourth quarter, sustaining its upward trajectory for the seventh consecutive quarter.
We’re additionally delighted to report that each SPEEDTEST and Opensignal have commodities because the quickest 5G service supplier in Taiwan just lately. We’re happy with the outcomes, and we’re persevering with to offer first-class 5G community high quality for patrons to high up 5G migration.
Transferring on to Slide 6. You might discover an replace of our mounted broadband enterprise. Within the fourth quarter, our mounted broadband income elevated by 3.7% year-over-year, and the subscriber quantity continues to develop as nicely. As well as, the gathered setup for strong speeds of 300 megabits per second or increased elevated by 51.9% year-over-year, primarily because of our promotion technique which successfully accelerated our subscriber’s migration to service and to increased service pace.
By 2022, we had been excited to see greater than 70% of the bundle gives of CYBG upgraded their service pace. Now greater than 60% of the adopters signed up for strong pace of 500 megabits per second or increased. Our mounted broadband ARPU thereby achieved 2.1% year-over-year progress within the fourth quarter, sustaining its upward development for 14 consecutive quarters.
In 2023, we are going to proceed the momentum by rolling out one other promotion technique and additional strengthen the incentives by lifting the upstream pace that tailed with 300 megabits per second research from 100 megabits per second to 150 megabits per second, distinguishing ours from our friends.
Now let’s transfer on to the efficiency of our customer-centric enterprise group. Slide 8 presents the income of our Shopper Enterprise Group or CBG. Within the fourth quarter, whole income of CBG decreased by 2.1% year-over-year regardless of the sturdy progress of our core enterprise. Cellular service income grew by 7.1% year-over-year, propelled by the rise of postpaid subscribe numbers and the regular 5G migration.
Whereas mounted voice income continued to say no as anticipated. Our whole mounted line service income of CBG nonetheless in a slight year-over-year improve, because of the profitable upsell propelled by the pace improve promotion packages in addition to the FIFA World Cup broadband — broadcast and the marketing campaign in November. Nevertheless, gross sales income decreased by 12% year-over-year, primarily as a result of continued unstable iPhone provide throughout the quarter. Different income additionally decreased by 34.9% year-over-year, owing to the upper base ensuing from the federal government subsidies for accelerated 5G development within the fourth quarter of 2021.
Slide 9 additional illustrates our Shopper Enterprise Group highlights. Within the fourth quarter, our multiple-play packages continued to assist the expansion momentum of our CBG enterprise. The subscriber numbers of cellular, mounted broadband and WiFi companies altogether demonstrated a 28% year-over-year progress. Specifically, our house WiFi machine subscription quantity grew greater than 1.5x on a year-over-year foundation, testing our subscription-based income and sustaining the recognition of home-centric purposes.
The variety of our video subscription that comprised of MOD and Hami Video, that are paid in month-to-month charges on an annual foundation, moderately than one time join, grew by 8.9% year-over-year within the fourth quarter, with progress primarily pushed by Hami Video, because of the favored FIFA World Cup going down in November. We had been additionally delighted to see the associated promoting income was 5 factors greater than that of the lack of FIFA World Cup third — fourth yr in the past — years in the past, demonstrating our success in presenting our common content material to prospects.
Turning into 2023. We’ll proceed the content material engagement technique with a deal with sports activities occasions and the unique channels to additional improve general subscriber stickiness and contribution.
Please flip to Slide 10 for an outline on our Enterprise Enterprise Group efficiency. Within the fourth quarter, EBG maintained its progress trajectory by demonstrating 2.9% income improve on a year-over-year foundation, primarily attributable to the expansion of our ICT enterprise, notably in IDC, service supply, 5G networks and massive information companies. Additionally, our EBG cellular service income elevated by 3.3%, pushed by 5G upselling and the rise of consumers.
Different income additionally elevated by 46.8% year-over-year, primarily as a result of gear gross sales pushed from subsidiaries. Moreover, we see the digital transformation development and its alternatives proceed to leap up information communication and broadband belongings income to develop by 5.4% year-over-year, particularly the pace improve demand from enterprise and faculties though mounted line income saved flat year-over-year within the fourth quarter, affected by the lower of income.
Slide 11 illustrates our enterprise enterprise highlights. Within the fourth quarter, our whole enterprise rising utility income elevated by 8.8% year-over-year as most of our main purposes demonstrated double digits year-over-year progress fee. 5G non-public community income delivered a multiple-fold progress, primarily as a result of elevated gathered initiatives however in recurring revenues. As well as, we’re evolving the 5G non-public community enterprise mannequin by offering leasing preparations for enterprise to recurring income.
We had been delighted to report that the 5G non-public community leasing preparations gained reputation within the PCB trade within the fourth quarter and is anticipated to increase to different verticals going ahead. For IDC, huge information and cyber safety companies, we’re delighted to see year-over-year income progress by 45%, 37% and 17%, respectively, owing to the elevated demand of digital transformation and alternatives.
Within the fourth quarter, we efficiently leveraged our huge information evaluation, data, safety and blockchain applied sciences to ship built-in options for the insurance coverage trade. Along with the Large Information platform, authorities for insurance coverage regulatory oversight, we additionally helped the trade to consolidate our purchasers throughout totally different insurance coverage firms, proudly owning by the identical policyholder to streamline reinvestment course of.
Slide 12 illustrates our worldwide enterprise efficiency. Within the fourth quarter, our worldwide enterprise group income decreased by 7.1% year-over-year, primarily as a result of increased base of different income acknowledged within the fourth quarter of 2021 associated to ST-2 compensation. Excluding the non-recurring impression, IBG income within the fourth quarter maintained its progress momentum and elevated by 19.7% year-over-year, primarily pushed by rising enterprise income and the mounted broadband income as a result of sturdy demand for IDC and the cloud companies from international purchasers. In December, our technical assist heart in Malaysia has formally began working for — to completely assist enterprise enlargement within the Pacific house market.
Now I want to flip the decision to Vincent for our monetary highlights.
Vincent Chen
Thanks, President, Kuo. Good afternoon, everybody. I’ll now stroll you thru our fourth quarter monetary outcomes.
Let’s begin with Slide 14, revenue assertion highlights. For the fourth quarter of 2022, whereas income generated from our core enterprise elevated by 2.3%, whole income decreased by 0.7% on a year-over-year foundation, primarily attributable to decreased gross sales revenues ensuing from the scarcity of handsets. Web revenue decreased by 2.2%, primarily as a result of gross sales decline and the grant of presidency subsidy for the acceleration of 5G deployments in This autumn of 2021.
In the meantime, our EBITDA margin elevated to 35.05% from 34.82%. For full yr outcomes, we had been glad with whole income elevated by 3% in comparison with 2021, driving by rising core enterprise, together with cellular, ICT and broadband companies. Revenue from operations and internet revenue grew by 4.2% and a couple of.1% on yr, respectively, primarily as a result of our sturdy core enterprise and rising ICT enterprise. EBITDA margin rose from 39.59% to 39.80%.
Now transfer on to Web page 15 for steadiness sheet highlights. Whole belongings on the finish of 2022 elevated by 2.1% on yr, primarily pushed by the rise in money and money equivalents because of money proceeds from issuance of sustainable bonds in addition to decreased negotiable certificates of deposits. Whole liabilities elevated by 6.5%, primarily attributable to extend of bonds payable and revenues and deferred authorities grant revenue. Our steadiness sheet stays sturdy and that debt ratio stays under 25% and internet debt over EBITDA is 0.
Web page 16 presents the abstract of our money flows. Money flows from working actions elevated by 1.4% on yr primarily as a result of increased internet revenue arising from our sturdy working efficiency. As for capital expenditure, the quantity of cellular and nonmobile CapEx mixed decreased by 10.7% on-year, of which mobile-related CapEx was lowered by about 18% year-over-year as 5G capital spending was peaked in 2021. Moreover, relative to 2021, free money flows elevated by 12.4%. Total, our sturdy money flows along with sturdy steadiness sheet allow us to nonetheless see expanded uncertainty and deal with long-term worth creation.
On Slide 17, we offered a desk that compares our monetary outcomes with our monetary steerage. Within the fourth quarter of 2022, key efficiency measures resembling income, internet revenue and EBITDA meet or beat our monetary forecasts. For the complete yr outcomes, all efficiency measures exceeded our steerage with working revenue and internet revenue inside our projections by a modest margin.
Turning to Slide 18. Please see our steerage for 2023. Wanting forward, whole income for 2023 in comparison with 2022 is anticipated to extend by between 2.1% and a couple of.8%, primarily pushed by progress momentum in our core enterprise that profit from 5G migration and broadband upgrades. ICT enterprise additionally contributed as we anticipate rising rising companies to fulfill prospects’ calls for for digital transformation and its alternatives.
Working prices and bills for 2023 are anticipated to rise by 4% because of internet investments impairment and infrastructure that helps future enterprise improvement in core and rising companies. Given these projections, we anticipate our EPS to be within the vary between TWD 4.45 and TWD 4.65. As for capital spending, we price range TWD 35.32 billion for 2023. Cellular-related CapEx accounts for 1/3 and represents an anticipated lower of about 13% on yr. Non-mobile associated CapEx, which comprise of investments in mounted line community, IDC and complement cables is anticipated to extend by 32% on yr to assist enterprise enlargement in talked about enterprise.
Now I want to flip the decision over to President, Kuo for our awards and recognitions.
Harrison Kuo
Thanks, Vincent. We’ve got at all times thought of ESG whereas working our enterprise, and the subsequent web page demonstrates our ESG efforts. Our ESG efforts have been well known by each home and worldwide organizations and ranking businesses resembling Dow Jones S&P International, Forbes and The Asset. Earlier than I increase our affect, within the fourth quarter, we launched a Inexperienced ICT Provide Chain, becoming a member of palms with 45 key suppliers to energy internet zero emissions. We additionally partnered with KIPP impressed faculty of Taiwan to achieve out to cities which have a relative lack of instructing assets to assist facilitate on-line which means. We imagine these new developments are key to our success and the long-term progress, and we are going to proceed to deal with ESG improvement going ahead.
This concludes our ready remarks. Thanks to your consideration. And this time, I want to open up our convention name for questions.
Query-and-Reply Session
Operator
[Operator Instructions]. And our first query is coming from Neale Anderson of HSBC.
Neale Anderson
Two questions, please, each on the cellular aspect of the enterprise. You talked about that you just’re happy with the restoration in roaming and pay as you go. Is it potential so that you can quantify the contribution that made. And in case you anticipate that to proceed to extend by way of 2023. The second query pertains to 5G. Clearly, a lot of prospects have now moved to 5G tariffs. So what degree of income progress do you anticipate this yr on the 5G aspect? And likewise, what degree of contribution do you anticipate from a few of the new company companies you talked about such because the 5G non-public networks?
Harrison Kuo
Thanks, Neale, to your questions. For the primary query in regards to the pay as you go, proper, so briefly, we do not present numbers on our pay as you go by way of income or subscriber area. However with the entire reopenings so it was again to progress in income and subscription will develop in pay as you go subscribers. And that is fairly constructive as a result of we now have seen there’s a enormous demand for abroad travels, and we will even develop out the promotion packages to our prospects and never solely the outgoing but additionally the incoming vacationers.
And to your second query about 5G, proper? So principally, this yr — sorry, final yr, we’re more than happy about our efficiency about our cellular enterprise. So for the — not just for the income — whole income progress in cellular enterprise but additionally uplift from the margin migration. So we do not disclose overtly about our inside information, we’re nonetheless fairly optimistic, and we imagine by way of the progress of our 5G penetration fee, truly, the market has been developed in a constructive and regular method, and we imagine that can contribute to our income modestly.
Neale Anderson
Acquired it. Might I simply comply with up on the roaming aspect? So I perceive you do not disclose the precise numbers. However within the fourth quarter, was it just about again to pre-pandemic ranges by way of roaming service income?
Harrison Kuo
So it’s now going again to the impression — not but to pre-pandemic degree but, however we anticipate we’ll get well about like 70%, 80%, sure, for this yr. Sure.
Operator
[Operator Instructions]. And the subsequent query is from Sara Wang of UBS.
Sara Wang
So I’ve two questions. First is that how is the margin of the enterprise ICT enterprise? After which my second query is that I perceive the ICT or enterprise enterprise nonetheless requires funding. So we do see improve in OpEx and CapEx in 2023. So any time line or expectations for the ICT enterprise by way of the earnings quarters or how we could take into consideration EBITDA and internet margin going ahead?
Harrison Kuo
Okay. So for the margin for the enterprise enterprise, proper? So it is about — I believe it is about 20% or so, sure. So it relies on the person initiatives. It is about that degree. What’s encouraging is definitely our ICT margin has gone up final yr. And likewise for the time line for us to offer the margin and EBITDA numbers, proper, so we are going to present it ranging from first quarter subsequent yr — this yr, sure, 2023.
Sara Wang
Acquired it. After which the 20% margin is gross margin, proper?
Harrison Kuo
Sure, we solely offered the web margin, sure, not the revenue margin, sure, not the gross margin.
Sara Wang
I simply need to verify. So the 20% quantity is internet margin for enterprise ICT enterprise?
Harrison Kuo
For the enterprise, proper? So the web margin is about 20%. In order that’s the knowledge we at present disclose for now.
Operator
[Operator Instructions]. Subsequent, we’ll have Neale Anderson of HSBC for questions.
Neale Anderson
I had a comply with up on the availability chain. I do know a few of the delays. So that you talked about that the handset income was down a little bit bit as a result of weaker handset suppliers. And I believe a few of the CapEx was additionally deferred into this yr. Do you — is that bettering? How a lot visibility do you may have on that? Do you anticipate to see continued points this yr? Or are you able to see that bettering?
Harrison Kuo
So principally, the availability chain interruption situation has been reviewed just lately. However to the extent of whether or not how quickly or to what extent it goes again to the traditional degree, we’re nonetheless not sure. So it relies on the scenario.
Operator
[Operator Instructions]. And if there aren’t any additional questions, I’ll flip it again over to President, Kuo. Please proceed. Thanks.
Harrison Kuo
Thanks to your participation. Goodbye, everybody.
Operator
Thanks, President, Kuo, and we thanks to your participation in Chunghwa Telecom’s convention. There can be a webcast replay inside an hour. Please go to www.cht.com.tw/ir below the IR Calendar part. You might now disconnect. Goodbye.