Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. (CHT) is dated January 10, 2020. The report covers operating results for December 2019 and the full fiscal year 2019. It also discloses several related-party transactions involving the acquisition of right-of-use assets by subsidiaries and corporate donations approved in December 2019.
Key Financial Metrics
Full Year 2019 Performance
- Total Revenue: NT$207.52 billion
- Operating Income: NT$40.70 billion
- Income Before Tax: NT$41.78 billion
- Net Income (Parent): NT$32.81 billion
- Earnings Per Share (EPS): NT$4.23
December 2019 Performance
- Consolidated Revenue: NT$20.14 billion (Year-over-Year increase)
- Operating Costs and Expenses: NT$16.83 billion
- Operating Income: NT$3.26 billion
- Income Before Tax: NT$3.19 billion
- Net Income (Parent): NT$2.47 billion
- Earnings Per Share (EPS): NT$0.32
Liquidity and Derivatives
- Funds Lent: NT$0 for both parent and subsidiaries.
- Guarantees: Accumulated limited amount for subsidiaries is NT$2,868,521 thousand; parent company has NT$0.
- Financial Derivatives: Outstanding forward contracts totaled NT$50,910 thousand (non-trading, non-hedge) and NT$84,066 thousand (non-trading, hedge accounting). Net unrealized gains/losses recognized for the year were mixed.
Material Changes vs. Prior Period
- Full Year Revenue: Decreased by NT$7.96 billion (-3.70%) compared to 2018.
- December Revenue: Increased by NT$667.99 million (+3.43%) compared to December 2018.
- Revenue Drivers: The December increase was driven by higher ICT project revenue, which offset declines in handset sales, government service revenue for internet business, and fixed-line voice revenue.
- EPS Guidance: The accumulated EPS of NT$4.23 for 2019 was reported as below the company's guidance.
Outlook, Risks, and Unusual Items
Management Commentary and Outlook
Management indicated that ICT project growth is a key offsetting factor against traditional revenue declines. An investor conference call regarding Q4 2019 results was scheduled for January 22, 2020.
Related Party Transactions
Several subsidiaries acquired right-of-use assets (office premises) from the parent company or its business groups in December 2019:
- CHT Security Co., Ltd.: Acquired assets from Southern Taiwan Business Group (NT$480,000 total) and Data Communication Business Group (NT$281,880 total).
- Chunghwa System Integration Co., Ltd.: Acquired assets from the parent company totaling NT$5,325,696.
Donations
The Board approved total donations of NT$68.58 million to related parties, including NT$51.7 million to the Chunghwa Telecom Foundation and NT$16.88 million to government agencies (including the Ministry of Transportation and Communications, a major shareholder).
Investor Verification Checklist
- Verify the specific reasons for the full-year revenue decline of 3.70% despite December growth.
- Confirm the details of the "below guidance" EPS miss and any updated outlook provided in the January 22, 2020 conference call.
- Review the valuation methodology for the related-party asset acquisitions to ensure terms were consistent with market rates.
- Monitor the impact of declining fixed-line voice and handset sales on future revenue mix.
- Assess the exposure to financial derivative risks given the outstanding forward contract positions.