Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. covers events and announcements occurring between January 22, 2007, and February 12, 2007. The company is a major telecommunications provider in Taiwan. The filing includes internal financial figures for the full year 2006 and preliminary results for January 2007, alongside various corporate governance, legal, and strategic partnership updates.
Key Financial Metrics
2006 Full Year Results (Internal Unaudited)
- Revenue: NT$184.39 billion
- Net Income After Tax: NT$44.89 billion
- Earnings Per Share (EPS): NT$4.63
January 2007 Results (Internal Unaudited)
- Revenue: NT$15.4 billion (Net sales: NT$15,440,004 thousand)
- Income from Operations: NT$6.1 billion
- Net Income: NT$5.0 billion
- Earnings Per Share (EPS): NT$0.52
Investments and Capital
- Short-term Investment: Accumulative purchase of Fidelity US High Yield Fund totaled NT$370.7 million (962,520.4 units).
- Operating Capital: NT$35.05 billion (as of most recent financial statement).
- Securities Investment Ratio: 3.0% of total assets; 3.55% of shareholder's equity.
Material Changes and Operational Updates
Revenue Trends
January 2007 net sales increased by 1.08% compared to January 2006 (NT$15.44 billion vs. NT$15.28 billion). Invoice amounts remained relatively flat, increasing by only 0.14%.
Strategic Alliances
Chunghwa Telecom signed an alliance with Cathay Financial Holdings (effective Jan 25, 2007, through Jan 24, 2008). Key terms include transferable bonus points for telecom fees, joint real estate exploitation, and mutual employee benefits.
Real Estate Development
The company signed a contract with Ruentex Development Co., Ltd. to co-develop land in Taipei (2,332 ping). Chunghwa contributes 60% land ownership, while Ruentex contributes 40% building construction. Ruentex guaranteed a minimum revenue of NT$2 billion to Chunghwa.
Procurement
The company procured a Network Quality Testing System (xPETS3) from a related party, Chunghwa System Integration Co., Ltd., for NT$520.15 million.
Guidance, Risks, and Contingencies
Regulatory Fines and Legal Disputes
- NCC Fine: The National Communications Commission (NCC) fined the company NT$300,000 for violating tariff regulations regarding the "Campus Premium Package." The company has suspended the package and expects to take legal procedures upon receiving formal documents.
- Compensation Claim: First International Telecom (FITEL) filed for NT$20 million in compensation regarding ISR traffic transfer rates. Chunghwa disputes the rate claimed by FITEL (NT$6.6/min vs. NT$2.35/min) and will follow NCC findings.
Corporate Governance
- Management Change: Joseph C.P. Shieh replaced Hank H.C. Wang as the financial spokesperson effective January 30, 2007.
- Share Pledging: Directors and supervisors (specifically the Ministry of Transportation and Communications) have pledged over 80% of their shareholdings (81.8%) as collateral for credit extended for the National Stability Fund.
Investor Verification Checklist
- Verify the final audited 2006 financial statements to confirm the internal figures of NT$184.39 billion revenue and NT$44.89 billion net income.
- Monitor the outcome of the NCC legal proceedings regarding the NT$300,000 fine and the "Campus Premium Package" suspension.
- Track the resolution of the NT$20 million compensation dispute with First International Telecom.
- Assess the financial impact and progress of the real estate co-development project with Ruentex Development Co., Ltd.
- Review the implications of the high pledging ratio (81.8%) of government-owned shares on corporate governance stability.