Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. covers events and announcements from March 11, 2008, through April 10, 2008. The company is a foreign private issuer reporting under Rule 13a-16. Key activities during this period included the release of full-year 2007 earnings, March 2008 revenue figures, strategic alliances, capital reduction discussions, and regulatory updates regarding investments and derivatives.
Key Financial Metrics
Full Year 2007 Results
- Consolidated Revenue: NT$197.39 billion (7.0% increase year-over-year).
- Net Income (ROC GAAP): NT$48.25 billion (7.5% increase year-over-year).
- Earnings Per Share (ROC GAAP): NT$4.56.
- Net Income (US GAAP): NT$49.45 billion.
- Earnings Per Share (US GAAP): NT$4.68.
- Total Assets (ROC GAAP): NT$469.63 billion.
- Total Liabilities (ROC GAAP): NT$71.78 billion.
- Total Shareholders' Equity (ROC GAAP): NT$397.84 billion.
First Quarter 2008 Results (March)
- March 2008 Net Sales: NT$14.79 billion (2.6% increase vs. March 2007).
- Accumulated Net Sales (Q1 2008): NT$46.73 billion (3.1% increase vs. Q1 2007).
- Q1 2008 Pre-tax Operating Results: NT$15.87 billion.
- Q1 2008 Net Operating Results: NT$10.68 billion.
- Q1 2008 EPS (After Tax): NT$1.12.
Investment and Liquidity
- Short-term Investment Disposal: Sold GAM US Dollar Special Bond Fund for USD$11.25 million, realizing a profit of USD$253,286.90.
- Operating Capital: NT$63.08 billion (as of most recent financial statement).
- Capital Reduction Plan: A proposed NT$20 billion capital reduction is under discussion with the Ministry of Transportation and Communications (MOTC).
Material Changes and Operational Updates
- Derivatives Trading Classification: Adjusted the classification of declared derivative trading from "forward contract" to "Option-sell-put," "Option-buy-call," and "Others" per Taiwan Stock Exchange suggestions. The company stated this is a classification adjustment with no impact on profit and loss consistency.
- Regulatory Disapproval: The National Communications Commission (NCC) disapproved Chunghwa Telecom's investment in Global Mobile. The company expressed regret and plans to respond upon receiving formal documents.
- Capital Reduction Status: Reports indicated a potential postponement of the capital reduction plan beyond May 20. The company clarified that board approval is required in April, followed by AGM and regulatory review.
- Procurement:
- Acquired VDSL2 broadband access network system for NT$563.89 million from Hwacom Systems Inc.
- Procured Tandberg EN8030 Encoder MPEG-2 Encoding Expansion Project for NT$503.53 million from Hitron Technologies.
- Strategic Alliances:
- Signed an MOU with Advantech Co., Ltd. to co-develop "MoCo," a digital home monitor and control system.
- Announced an alliance with Cathy United Bank, MasterCard, Taipei Smart Card Co., and BenQ Co. for NFC-enabled credit cards.
Guidance, Outlook, and Risks
- Credit Rating: Standard & Poor's affirmed Chunghwa Telecom's "AA" long-term foreign-currency corporate credit rating with a stable outlook, removing the company from CreditWatch (negative implications) on April 10, 2008.
- Derivatives Risk: The company acknowledged unrealized valuation losses on foreign currency derivatives. It stated it is considering partially squaring the contract if market conditions improve to reduce exposure to NT dollar/US dollar fluctuations. The company does not currently plan to unwind the contract entirely.
- Capital Structure: The outcome of the NT$20 billion capital reduction plan remains contingent on board approval and regulatory clearance. The company holds 410 hectares of land with a book value of approximately NT$108 billion, one-third of which is in the Taoyuan area.
- Management Commentary: Management emphasized active participation in national projects concerning new telecom technologies despite the Global Mobile investment setback.
Key Facts for Investor Verification
- Verify the final status and timeline of the NT$20 billion capital reduction plan following the April board meeting.
- Monitor the resolution of the NCC disapproval regarding the Global Mobile investment and any potential legal or strategic responses.
- Track the company's management of foreign currency derivatives, specifically any partial squaring of contracts to mitigate unrealized valuation losses.
- Confirm the impact of the new NFC credit card alliance and digital home solutions on future revenue growth.
- Review the reconciliation between ROC GAAP and US GAAP financial statements, noting differences in employee bonuses, depreciation, and tax provisions.