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We maintain our long-term Neutral recommendation on Chunghwa Telecom Co. Ltd. (CHT - Analyst Report). The company reported mixed financial results for the second quarter of 2013. We believe that Chunghwa is currently fairly valued.

Why the Reiteration?

Chunghwa is the largest integrated telecommunications service provider in Taiwan. The company offers a full suite of telecom services through fixed-line, mobile, and data networks throughout Taiwan and also to offshore islands. Though fixed-line service became relatively saturated, we believe Chunghwa’s mobile and Internet/Data operations will drive overall growth over the next several years. Aggressive rollout of fiber-to-the-home and 3G mobile services have placed the company ahead of its competitors. The company has also expanded into IPTV and cloud-computing services.

Chunghwa holds 80% of the broadband market share, along with 96% of local fixed-line and 77% of the long-distance fixed-line market share. The company also commands 34% of the Taiwanese wireless market share. Management has set a revenue target of approximately $7.6 billion by 2015, which will be an improvement of 16% from 2010.       

Recently, CHT Global, the U.S. subsidiary of Chunghwa, entered into an agreement with U.S. telecom giant Sprint Corp. (S - Analyst Report). Per the deal, CHT Global will become a mobile virtual network operator (MVNO) of Sprint. The company will provide wireless data services to several enterprises and traveling business professionals using Sprint’s 3G and 4G LTE network.

Other Stocks to Consider

Chunghwa currently has a Zacks Rank #4 (Sell). Other stocks in the non-U.S. telecom service provider industry which are performing well include BT Group plc. (BT - Snapshot Report) and Hawaiian Telecom Holdco Inc. (HCOM - Snapshot Report). Both these stocks currently have a Zacks Rank #2 (Buy).

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