Chunghwa Outpaces Competition

Chunghwa Telecom (CHT - Analyst Report) is the largest integrated telecom operator in Taiwan. Chunghwa commands a significant market share of traditional voice and dial-up services, VoIP, IPTV and broadband in Taiwan.

Aggressive roll-out of fiber-to-the home and 3G network technology, in our opinion, has placed the company ahead of near-term competition in Taiwan. In synergy with its strong balance sheet, management has decided to expand outside Taiwan and may also consider deploying 4G mobile technologies of LTE or WiMAX.

The company also announced arrangements with Apple, Inc. (AAPL - Analyst Report) to sell 3G enabled iPhones in the Taiwanese market. We reiterate our Buy rating with the same US $22 valuation target per ADR shares.

At the end of fiscal 2008, the company had 8.95 million mobile subscribers, up 0.9% sequentially, which includes 3.56 million high-margin 3G subscribers. Mobile value-added services revenue also increased significantly, 25% year-over-year. Broadband ADSL and FTTB, together, registered 4.32 million subscribers, up 1.4% year-over-year.

FTTx subscribers with an average speed of 10 Mbps reached 1.07 million represent 24.8% of its broadband subscribers. Total fixed-line subscribers, however, decreased slightly to 12.7 million at the end fiscal 2008.