Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. (CHT), dated May 10, 2021, reports on corporate events and financial results for the first quarter of 2021 (ended March 31, 2021) and the month of April 2021. The filing includes announcements regarding Q1 consolidated financial statements, April 2021 operating results, related-party transactions, and changes in key personnel.
Key Financial Metrics
First Quarter 2021 (Ended March 31, 2021)
- Operating Revenue: NT$50,100,995 thousand (Taiwan-IFRSs).
- Net Income: NT$9,121,630 thousand (Taiwan-IFRSs); NT$8,638 million (IFRSs).
- Net Income Attributable to Parent: NT$8,804,944 thousand (Taiwan-IFRSs); NT$8,338 million (IFRSs).
- Basic EPS: NT$1.14 (Taiwan-IFRSs); NT$1.07 (IFRSs).
- Total Assets: NT$506,501,196 thousand (Taiwan-IFRSs); NT$506,300 million (IFRSs).
- Total Liabilities: NT$109,050,456 thousand (Taiwan-IFRSs); NT$111,318 million (IFRSs).
- Equity Attributable to Parent: NT$385,766,989 thousand (Taiwan-IFRSs); NT$394,982 million (IFRSs).
April 2021 Operating Results
- Consolidated Revenue: NT$16.34 billion (up 3.96% year-over-year).
- Operating Income: NT$3.75 billion.
- Income Before Tax: NT$3.74 billion.
- Net Income Attributable to Parent: NT$2.89 billion.
- Basic EPS: NT$0.37.
Derivatives and Guarantees (As of April 2021)
- Outstanding Forward Contracts (Non-trading): NT$176,940 thousand (non-hedge) and NT$900,886 thousand (hedge accounting).
- Accumulated Guarantees (Subsidiaries): NT$3,033,797 thousand.
- Funds Lent to Others: NT$0.
Material Changes and Comparisons
April 2021 revenue increased year-over-year primarily due to growth in handset sales and mobile service revenue, which offset a decline in fixed-line voice revenue. Operating costs rose to NT$12.59 billion, driven by higher cost of goods sold associated with increased sales. For the first quarter, the filing highlights differences between Taiwan-IFRSs and IFRSs, noting that net income under IFRSs is lower due to the timing of income tax recognition on unappropriated earnings and the deferral of revenue from connection fees and prepaid cards.
Guidance, Outlook, and Corporate Events
Guidance Performance: April 2021 revenue met the second-quarter guidance previously announced. Operating income, pretax income, and EPS all exceeded the guidance levels.
Related-Party Transactions:
- Asset Acquisitions: Subsidiary Honghwa International Corporation acquired right-of-use assets (221 rental stores and an education building) from the parent company, Chunghwa Telecom, for a total transaction amount of approximately NT$220.3 million.
- IMS Core Project: The Board approved a related-party transaction with affiliate Taiwan International Standard Electronics Ltd. for an IMS Core construction project totaling NT$519 million.
Personnel Changes:
- Chief Audit Executive: Min-Gume Cheng retired; Chiu-Ming Lien appointed as the new Chief Audit Executive (effective June 30, 2021).
- Director Appointment: Shih-Hung Tseng appointed as the new representative of the Juristic Person Director (Ministry of Transportation and Communications).
Investor Verification Checklist
- Verify the reconciliation of Q1 2021 net income between Taiwan-IFRSs (NT$9.12 billion) and IFRSs (NT$8.64 billion) to understand the impact of tax timing and revenue deferral policies.
- Confirm the sustainability of the mobile service revenue growth and handset sales trends cited as drivers for the April 2021 revenue increase.
- Review the terms and pricing rationale for the related-party asset acquisitions by Honghwa International Corporation to ensure fair value.
- Monitor the progress and cost implications of the NT$519 million IMS Core construction project with the affiliate.
- Assess the exposure to foreign exchange risk given the outstanding forward contract positions (approx. NT$1.08 billion total).