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Chunghwa Lags Earnings, Tops Revenues

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Chunghwa Telecom Co. Ltd. declared mixed financial results for the second quarter of 2013. Quarterly total revenue was approximately $1,865 million, recording a 2.6% rise year over year. Second-quarter 2013 net income was around $355.4 million, down 7% year over year.  Net earnings per ADR were 46 cents, down 6.1% year over year.

Quarterly operating income was $422.5 million, down 5.6% year over year. Operating margin was 22.7% compared with 24.6% in the year-ago quarter. The second-quarter 2013 EBITDA was $690 million, down 3.8% year over year. Quarterly EBITDA margin came in at 37% compared with 39.5% in the prior-year quarter. During the reported quarter, Chunghwa generated around $647 million of cash from operations, up 43.7% year over year. Capital expenditure during the same quarter was around $269 million, up 6.8% year over year.

At the end of fiscal 2012, Chunghwa had approximately $15,202 million of cash & cash equivalents and a little over $1,748 million of outstanding debt on its balance sheet compared with $14,853 million of cash & cash equivalents and $38.3 million of outstanding debt at the end of 2011.

Segment wise Revenue

The Mobile Communications segment accounted for approximately $898 million of the second quarter 2013 revenues, up 8.6% year over year. The Internet segment generated $207 million, up 3.2% year over year. The Domestic Fixed-line Communications segment generated $607 million in revenues, down 2.3% year over year. The International Fixed-line Communications segment generated $135 million, up 4.1% year over year. Other Business segment generated the remaining $19 million, down 52.5% year over year.

In the second quarter of 2013, Broadband access (including ADSL and FTTx) revenues were around $156.3 million, down 1.8% year over year. Mobile VAS revenues were nearly $227.8 million, up 35.1% year over year. Handset sales revenues were $252.8 million, up 16.1% year over year.

Subscriber Statistics as of Jun 30, 2013

The total Broadband subscriber base was more than 4.55 million, out of which FTTx subscriber base was around 2.83 million, accounting for 62.2% of the total broadband subscriber base. 1.02 million Broadband subscribers signed up for 50 Mbps connections, up 50.4% year over year.  HiNet subscriber base was 3.78 million, up 0.8% year over year. Mobile subscriber base was 10.42 million, up 2.9% year over year. Mobile Internet subscriber base was 3.17 million, up by a significant 58.6% year over year. Chunghwa currently commands 33.5% of the mobile Internet market share in Taiwan. In the reported quarter, the company added a net of 117,000 mobile Internet subscribers. International /Domestic Fixed-line subscriber base was 11.68 million.

2013 Outlook

The 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

Chunghwa currently has a Zacks Rank #4 (Sell). Other stocks in this industry that are worth considering include Cincinnati Bell Inc. (CBB - Free Report) , Hawaiian Telecom Holdco Inc. and SK Telecom Co. Ltd. . While Cincinnati and SK Telecom currently have a Zacks Rank #1 (Strong Buy), Hawaiian Telecom carries a Zacks Rank #2 (Buy).

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