Chunghwa Telecom Co., Ltd. Q3 FY2025 earnings call

• Extending the outperforming results of the first half, third quarter revenue, operating income, net income and EPS all exceeded the upper end of forecast, with third quarter revenue hitting its highest level since 2017 and ICT revenue setting a new third quarter record since 2021.
• For midterm to long-term development, group expansion and AI-related initiatives are critical. Cybersecurity subsidiary completed public listing in September, InventAI subsidiary launched in October. Self-developed Vision-Language Model technology secured first place in transportation category at Global AI City Challenge. Taiwan holds the largest portfolio of AI-related patents in the industry.
• Overcame challenges to deliver portable OneWeb equipment and restore communication in isolated areas affected by typhoon in August. Completed issuance of TWD 3.5 billion sustainability bond in third quarter to promote biodiversity, EV initiatives and other environmental projects.
• In mobile market, further strengthened leadership position with mobile revenue market share and subscriber share growth, 5G performance impressive. Fixed broadband revenue growth driven by high-speed migration and promotions, ARPU increased.
• Consumer application services multi-play package grew strongly, drama investments successful, consumer cybersecurity services grew. Enterprise ICT business group ICT revenue and recurring ICT revenue grew, key service pillars saw growth, and secured major projects.
• International subsidiary U.S. achieved strong revenue growth, Japan anticipates more projects, Southeast Asia markets thrive, and various solutions introduced globally

Mobile Business:

• Third quarter mobile revenue market share climbed to a new high of 40.8%, subscriber share among peers rose to 39.4% (1.6 percentage point year-over-year increase, mainly driven by postpaid subscribers growth). 5G subscriber market share rose to 38.8%, 5G penetration rate among smartphone users further increased to 44.7% by end of third quarter, average monthly fee uplift from 5G migration remained robust at ~40%. Mobile service revenue growth outpaced industry with 3.3% year-over-year increase, postpaid ARPU grew 1.8% year-over-year.

Fixed Broadband Business:

• Third quarter fixed broadband revenue grew by 3.2% year-over-year, driven by high-speed migration and promotion packages. Number of subscribers choosing speed of 300 megabits per second and above increased by ~14% year-over-year, those opting for 500 megabits per second and above recorded double-digit growth, 1 gigabit per second and above achieved multiple for expansion. Fixed broadband ARPU rose 3% year-over-year, an increase of TWD 23 per month.

Consumer Application Services:

• Multi-play package integrating mobile, fixed broadband and WiFi services achieved 22% year-over-year growth, marking 15 consecutive quarters of expansion. Consumer cybersecurity services recorded 17% year-over-year growth, with a steady number of blocked malicious link per user more than doubling compared to same period. Drama investments were successful, e.g., The Outlaw Doctor won Best Asia content in Global OTT Award in Busan.

Enterprise ICT Business:

• Group ICT revenue in third quarter increased 14% year-over-year, recurring ICT revenue grew by 19%. IDC cloud and cybersecurity posted year-over-year growth of 34% and 24% respectively, Big Data services surged by 130% year-over-year. Secured large network infrastructure project from leading life insurance company, and projects from Taipower and Taiwan Railway.

International Subsidiary:

• U.S. subsidiary achieved 70% year-over-year revenue growth primarily fueled by AIDC construction project of a Taiwan-based high-tech company in Texas. Japan subsidiary anticipates securing additional related projects. Southeast Asia markets continue to thrive with Singapore and Vietnam subsidiaries actively delivering plant construction services. Successfully introduced cybersecurity services to overseas clients in Southeast Asia and Japan, launched Smart Poles solution in Thailand, and generated overseas smart city revenue from Paraguay and Eswatini. Submarine cable SJC2 commenced operation and Apricot expected to follow in fourth quarter

• Third quarter financial results beat guidance, revenue, operating income, net income and EPS all exceeded upper end of forecast.
• Confident in full year financial results supported by leadership across all business segments.
• Midterm to long-term development relies on group expansion and AI-related initiatives, with AI capabilities recognized globally and Taiwan holding largest AI-related patent portfolio in industry

Q: What is the driver of our international projects business?

A: For international business, Chunghwa can play a role in the global AI supply chain. Potential opportunities in U.S. market with subsidiary doing projects in Texas for Taiwan high-tech companies. Similar opportunities in Japan market. Successfully introduced cybersecurity services from Chunghwa Telecom Security to Southeast Asian markets and Japan with collaboration of subsidiaries. Southeast Asia company sees opportunities from high-tech companies and tries to introduce smart city-related projects. Successfully introduced Smart Pole project in Thailand, developed and introduced in-house solutions and collaborated with partners