Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. is dated July 10, 2020. The report covers operating results and financial status for the month of June 2020 and the first half of the fiscal year (January through June 2020). The company is a foreign private issuer based in Taipei, Taiwan.
Key Financial Metrics
Revenue and Profit (June 2020)
- Net Sales: NT$15.98 billion (Consolidated).
- Operating Costs and Expenses: NT$12.46 billion.
- Operating Income: NT$3.51 billion.
- Income Before Tax: NT$3.75 billion.
- Net Income (Parent Company): NT$2.98 billion.
- Earnings Per Share (EPS): NT$0.38.
Revenue and Profit (January - June 2020)
- Net Sales: NT$95.96 billion.
Liquidity and Financial Instruments
- Funds Lent to Others: NT$0 for both the parent company and subsidiaries.
- Endorsements and Guarantees: Accumulated limited amount for subsidiaries is NT$2,969,625 thousand; parent company has NT$0.
- Financial Derivatives: The company holds forward contracts for non-trading purposes. Outstanding positions totaled NT$194,383 thousand (non-hedge) and NT$180,934 thousand (hedge accounting).
Material Changes Versus Prior Period
For June 2020 compared to June 2019:
- Net Sales: Decreased by NT$909.55 million (5.39%).
- YTD Net Sales (Jan-Jun): Decreased by NT$5.48 billion (5.40%).
- Revenue Drivers: The decline was primarily driven by decreases in handset sales, international fixed-line voice revenue, and mobile service revenue. These were partially offset by increases in ICT project revenue, data communications revenue, and international data services revenue.
- Cost Structure: Operating costs and expenses decreased year over year, attributed to declines in interconnection expenses and cost of goods sold.
Guidance, Outlook, and Management Commentary
Performance vs. Guidance: Management noted that operating income, pretax income, and EPS for June 2020 all exceeded the guidance previously announced by the company.
5G Investment: In response to media reports, the company clarified that a planned 5G investment of NT$27 billion is currently under planning. No official announcement regarding specific details has been made, and the company will issue further updates in accordance with regulations if necessary.
Related Party Transaction: On June 23, 2020, the subsidiary Chunghwa System Integration Co., Ltd. acquired a right-of-use asset (office premises) from the parent company. The total transaction amount was NT$768,000, with a monthly payment of NT$32,000 for a lease period from October 1, 2020, to September 30, 2022.
Investor Verification Checklist
- Verify the specific breakdown of revenue growth in ICT projects and data communications to understand the offsetting factors against the decline in traditional voice and handset sales.
- Confirm the timeline and regulatory approval status for the planned NT$27 billion 5G investment.
- Review the detailed terms of the related-party lease transaction between the parent and Chunghwa System Integration Co., Ltd.
- Monitor the fair value and unrealized gains/losses on financial derivative contracts, which showed mixed results in the period.