Chunghwa Reports Mixed 4Q

Chunghwa Telecom Co. Ltd. ( CHT - Analyst Report ) declared mixed financial results for the fourth quarter of 2012. Quarterly total revenue was approximately $1,924.4 million, showing a 2.5% rise year over year. Fourth-quarter GAAP net income was approximately $311.6 million, down 8.9% year over year. Net earnings per ADR were 40 cents, down 9.1% year over year. Chunghwa Telecom currently has a Zacks Rank #3 (Hold).

Quarterly operating income was $382.7 million, down 5.6% year over year. Operating margin was 19.9% compared with 21.6% in the year-ago quarter. Fourth-quarter 2012 EBITDA was $660.1 million, down 3.6% year over year. Quarterly EBITDA margin came in at 34.3% compared with 36.5% in the prior-year quarter. During the fourth quarter of 2012, Chunghwa generated around $838.9 million of cash from operations, down 19.1% year over year. Capital expenditure during the reported quarter was around $368.7 million, up 4.7% year over year.

At the end of fiscal 2012, Chunghwa had approximately $3,461.4 million of cash & cash equivalents and a little over $73.9 million of outstanding debt on its balance sheet compared with $3,501.3 million of cash & cash equivalents and $60 million of outstanding debt at the end of 2011.

Segment wise Revenue

The Mobile Communications segment accounted for approximately $875.5 million of the total fourth-quarter 2012 revenue, up 6.5% year over year. The Internet segment accounted for $223 million, up 7.6% year over year. The Domestic Fixed-line Communications segment generated $660.7 million in revenue, down 2.7% year over year. International Fixed-line Communications segment generated $135.1 million, up 4.3% year over year. Other Business segment generated the remaining $0.03 million, down 23% year over year.

In the fourth quarter of 2012, Broadband access (including ADSL and FTTx) revenue was around $165.5 million, down 4.2% year over year. Mobile VAS revenue was nearly $188.5 million, up 37.3% year over year. Internet VAS revenue was around $21.9 million, up 3.4% year over year. Handset sales revenue was $249.3 million, up 15.1% year over year.

Subscriber Statistics as of Dec 31, 2012

Total Broadband subscriber base was more than 4.556 million, out of which FTTx subscriber base was around 2.72 million, accounting for 59.7% of total broadband subscriber base. More than 905,000 Broadband subscribers signed up for 50M connections. HiNet subscriber base was 3.77 million, up 2.2% year over year. Mobile subscriber base was 10.27 million, up 2% year over year. Mobile Internet subscriber base was 2.48 million, up by a significant 64.9% year over year. This was better than management expectation of 2.45 million mobile Internet subscribers by the end of 2012. International /Domestic Fixed-line subscriber base was 11.79 million. Multimedia-on-demand (MOD) subscriber base was more than 1.19 million.

2013 Outlook

Total revenue is estimated around $7,449.5 million, down 1.1% year over year. Operating costs and expenses will be approximately $5,906.7 million, up 0.9% year over year. Income from operations is estimated to be approximately $1,542.8 million, down 8.1% year over year. Net income will be around $1,285.6 million, down 6.2% year over year. EBITDA will be approximately $2,675.1 million, down 4.1% year over year. EBITDA margin will be 35.9% compared with 37% in fiscal 2012.

Other Stocks to Consider

Other than Chunghwa, some other major telecom operators in the Asian region are S K Telecom Ltd. ( SKM - Analyst Report ) , China Mobile Hong Kong Ltd. ( CHL - Snapshot Report ) and China Unicom Hong Kong Ltd. ( CHU - Analyst Report ) . While S K Telecom currently has a Zacks Rank #1 (Strong Buy), both China Mobile and China Unicom carry a Zacks Rank #3 (Hold).